This paper extends a standard New Keynesian model to describe the effects of anticipated shocks to inflation and …

This paper studies the optimal long-run inflation rate in a simple New Keynesian model with occasionally binding … inflation rate is around 1.5% if the economy is hit by a total factor productivity (TFP) shock and nearly 2.5% if the economy is … asymmetric endogenous cost-push shock is positive, inflation is also positive on average. In addition, a binding collateral …

-specific output gaps and inflation rates, we find that performance of the optimal policy rule can be closely approximated by a very … simple rule that targets a weighted average of aggregate wage and price inflation rates. In contrast, some commonly …-prescribed policy rules (such as strict price inflation targeting and Taylor's rule) perform very poorly in terms of social welfare …

. Aggregating the model in closed form, we show that it delivers radically different predictions for the optimal inflation rate than … canonical sticky price models featuring homogenous firms: (1) the optimal steady-state inflation rate generically differs from … zero and (2) inflation optimally responds to productivity disturbances. Using micro data from the US Census Bureau to …

inflation in the durable goods sector. We then analyze the optimal Taylor rule for this economy. If the monetary authority wants … to stabilize the aggregate output gap, it places much more emphasis on stabilizing durable goods inflation (relative to … its share of value-added in the economy). In contrast, if the monetary authority values stabilizing aggregate inflation …

In closed or open economy models with complete markets, targeting core inflation enables monetary policy to maximize … is high. We develop an open economy model with incomplete financial markets to show that headline inflation targeting … headline inflation, assigns zero weight to import prices. …

This paper studies monetary policy rules in a small open economy with Inflation Targeting, incomplete pass-through and …

inflation are co-breaking. We argue that the step-like development of inflation is in line with shocks and monetary policy that …% inflation was accomplished by introducing an inflation targeting regime. …

fragility of leveraged firms in its pursuit of inflation-targeting interest rate policies. This paper develops a small …

This study examines the link between various monetary policy regimes and the ability to manage inflation and exchange … hypothesis is that a system of 'flexible inflation targeting' may be an optimal policy choice for managing these two categories … of risk. A model of inflation and exchange rate risk premiums within the context of inflation targeting is proposed …