We analyze the performance and robustness of some common simple rules for monetary policy in a New-Keynesian open economy model under different assumptions about the exchange rate model. Adding the exchange rate to an optimized Taylor rule gives only small improvements in terms of economic...

We study the effects of model uncertainty in a simple New-Keynesian model using robust control techniques.Due to the simple model structure, we are able to find closed-form solutions for the robust control problem, analysing both instrument rules and targeting rules under different timing...

This paper studies how a central bank's preference for robustness against model misspecification affects the design of monetary policy in a New-Keynesian model of a small open economy.Due to the simple model structure, we are able to solve analytically for the optimal robust policy rule, and we...

The paper shows that the procedure of inflation forecast targeting arguably implemented by Sveriges Riksbank and the Bank of England may lead to high nominal and real variability; the latter being manifested most notably in the traded sector. A long inflation forecast targeting horizon results...

The paper analyses alternative monetary policy regimes within a simple, estimated macroeconomic model with a traded and a non-traded sector. Two general classes of regimes are considered, inflation targeting and exchange rate targeting, where the latter also includes monetary union. By analysing...

This paper studies the strategic interaction between the fiscal and monetary authorities when the monetary policymaker pursues an underlying inflation target. Given that monetary policy is transparent and the fiscal policymaker can commit to a particular policy stance, the Stackelberg...

This paper examines the performance of inflation forecast feedback rules in a two-sector, calibrated model of the U.K. economy. Under such rules, the interest rate responds to the deviation of the unchanged-interest-rate forecast of inflation from the inflation target. We find that this...

We analyze the performance and robustness of some common simple rules for monetary policy in a New-Keynesian open economy model under different assumptions about the exchange rate model. Adding the exchange rate to an optimized Taylor rule gives only small improvements in terms of economic...

The performance of a simple monetary policy rule, which does not rely on explicit information about the output gap but instead uses the change in the rate of inflation as a proxy for the output gap, is explored in a simple model of the US economy. The rule is found to outperform an optimised...

This paper discusses the optimal use of inflation forecasts in an inflation targeting setting with reaction and implementation lags. It distinguishes between the optimality of history-dependence versus forward-lookingness in monetary policymaking. It is shown that monetary policy strategy is...