inconsistency problem arising from the temptation to stimulate the economy with unexpected inflation. Although this dynamic … mechanism design problem seems complex, society can implement the optimal policy simply by legislating an inflation cap that … specifies the highest allowable inflation rate. The more severe the time inconsistency problem, the more tightly the cap …

-based policies with the optimal forecast horizon for inflation ranging between two and three years. Benchmarking against fully optimal …

inflation and output play an important role. This paper illustrates how modern sticky-price dynamic stochastic general … distribution of the forecast, as well as various inflation risk measures that have been proposed in the literature. Finally, the …

provision of liquidity for a range of central-bank regulations dealing with the potential of bank failure. In our model, banks … issue and make reserve-management decisions which affect aggregate liquidity conditions. Numerical examples demonstrate bank …

credit risk transfer. The possibility of transferring credit reduces the impact of liquidity shocks on bank balance sheets … exacerbate the effect of productivity and other macroeconomic shocks on output and inflation. By offering a possibility of …