Uncertainty about the persistence of periods characterized by large price shocks is an important aspect of monetary policy. This type of uncertainty posed some difficulties for central banks in 2004. This paper formalizes the treatment of this type of uncertainty by solving an optimal control...

Inflation targeting requires inflation forecasts, yet most models in the literature are either theoretical or calibrated. The motivation for this paper is therefore threefold: We seek to test and implement an econometric model forforecasting inflation in Norway–one economy recently opting for...

The present paper investigates how the global financial crisis has prompted the need to revise monetary policy in general and inflation targeting in particular, with the final purpose of establishing whether the crisis has rendered inflation targeting obsolete or has only strengthened its...

Monetary policy is modeled as being governed by a known rule, except for a time-varying target rate of inflation. The variable target can be thought of either as standing in for discretionary deviations from the rule or as the outcome of a policymaking committee that is unable to arrive at a...

In the late 1960s and into the 1970s, the United States experienced a burst of inflation the origins of which seemed hard to uncover. This paper advances the idea that the Fed simply got the model wrong. We assume that the true model of the economy is a variant of the standard New Keynesian...

We study 30 vintages of FRB/US, the principal macro model used by the Federal Reserve Board staff for forecasting and policy analysis. To do this, we exploit archives of the model code, coefficients, baseline databases and stochastic shock sets stored after each FOMC meeting from the model’s...

In recent years, the learnability of rational expectations equilibria (REE) and determinacy of economic structures have rightfully joined the usual performance criteria among the sought after goals of policy design. And while some contributions to the literature (for example Bullard and Mitra...

In his monograph The Conquest of American Inflation, Sargent (1999) points out the perils of econometric policy evaluation of the Theil-Tinbergen tradition wherein one estimates a reduced form econometric model of the economy and subjects it to control. If the model is misspecified, as is...