This paper offers an alternative explanation for the behavior of postwar US inflation by measuring a novel source of monetary policy time-inconsistency due to Cukierman (2002). In the presence of asymmetric preferences, the monetary authorities end up generating a systematic inflation bias...

This paper investigates the performance of optimised interest rate rules when there is uncertainty about a key determinant of the monetary transmission mechanism, namely the degree of persistence characterising the inflation process. The paper focuses on the euro area and utilises two variants of...

Price level targeting has been proposed as an alternative to inflation targeting that may confer benefits if a central bank sets policy under discretion, even if societyu0092s loss function is specified in terms of inflation (instead of price level) volatility. This paper demonstrates the...

The presence of a lower bound of zero on nominal interest rates has important implications for the conduct of optimal monetary policy. Standard rational expectations models can have alternative steady states as well as non-unique laws of motion, i.e. there can be possible sunspot equilibria....

This paper investigates the in inflationary effects of fscal policy in an optimizing general equilibrium monetary model with capital accumulation, exible prices and wealth effects. The model is calibrated to Euro Area quarterly data. Simulation results show that government defcits, high debt...

Announcing a quantitative objective for price developments has become a common practice in modern monetary policy making. While the specific features of such announced objectives vary across countries, a common rationale for this is to help anchoring inflation expectations. We use survey data on...

This paper employs stochastic simulations of a small structural rational expectations model to investigate the consequences of the zero bound on nominal interest rates. We find that if the economy is subject to stochastic shocks similar in magnitude to those experienced in the U.S. over the...

This is a survey on the recent game theoretic literature on committee decision making. We consider theoretical work on the role of (i) strategic voting, (ii) costly information acquisition, (iii) conflicting interests, and (iv) communication in committees. Moreover, we review recent experimental...

This paper examines the feasibility of implementing Linear Quadratic Gaussian (LQG) Control in structural cointegrated VAR models and sheds some light on the two major problems generated by such implementation. The first aspect to be taken into account is the effect of the presence of unit roots...

A two-country sticky-price model is used to analyse the interactions between fiscal and monetary policy. The role of an u0091activistu0092 fiscal policy as a stabilisation tool is considered and a measure of the welfare gains from international fiscal policy cooperation is derived. It is found...