A stylised fact of monetary policy making is that central banks do not immediately respond to new information but rather seem to prefer to wait until sufficient 'evidence' to warrant a change has accumulated. However, theoretical models of inflation targeting imply that an optimising central...

This paper examines the implications of the expectations theory of the term structure for the implementation of inflation targeting. We show that the responsiveness of the central bank's instrument to the underlying state of the economy is increasing in the duration of the long-term bond. On the...

n this paper we incorporate the term structure of interest rates in a standard inflation forecast targeting framework. We find that under flexible inflation targeting and uncertainty in the degree of persistence in the economy, allowing for active learning possibilities has effects on the...

The implications of uncertain policy preferences for the targeting and contracting approaches to monetary policy are investigated. It is shown that, in the presence of uncertain preferences, a linear incentive contract in the sense of Walsh performs better than an explicit inflation target as...

The theoretical argument for central bank independence is based on the idea that even if the government represents people's preferences over inflation and output it has an incentive to renege from prearranged plans to gain a short run boost to output. This incentive leads to higher than desired...

The present paper uses a panel-data estimation technique to combine the time series for individual countries--Australia, Canada, France, Germany, Italy, Japan, the Netherlands, Switzerland, the United Kingdom and the United States. The authors postulated the response of central banks in these...

This paper develops a graphical method to determine the optimal degree of central bank conservativeness in an open economy. Unlike Rogoff (1985), the upper and lower bounds of the interval containing the optimal degree of conservativeness are expressed in terms of the structural parameters of...

In a comment on our recent paper in this journal, Beetsma and Jensen claim that Propositions 3 and 4 of our paper are incorrect due to minor computational mistakes. In this reply we give the correct propositions and show that our results still stand. Our conclusion is that central bank...