"Should central banks, because of the zero-lower-bound problem, raise their inflation-rate targets? Several arguments are relevant. (1) In the absence of the ZLB, the optimal steady-state inflation rate, according to standard New Keynesian reasoning, lies between the Friedman-rule value of...

The new open-economy macroeconomics' seeks to provide an improved basis for monetary and exchange-rate policy through the construction of open-economy models that feature rational expectations, optimizing agents, and slowly adjusting prices of goods. This paper promotes an alternative approach...

Topics covered in this survey paper include the following: distinguishing rules from discretion in practice; the feasibility of rule-like behavior by an independent central bank; optimal control vs. robustness as research strategies; choice among target variables; growth-rate vs. growing-level...