This paper examines the interactions between monetary policy and stability of interbank money markets. After showing some empirical evidence of a central bank's concern for money market stability I derive a forward smoothing interest rate rule moving from an explicit target in terms of a...

In a standard new Keynesian framework we derive the conditions under which increasing the inflation target does not deliver expectational instability. We consider two monetary policy regimes with respect to information about the inflation target. Under transparency, there is full disclosure of...

In a standard new Keynesian framework we derive the conditions under which increasing the inflation target does not deliver expectational instability. We consider two monetary policy regimes with respect to information about the inflation target. Under transparency, there is full disclosure of...

This paper examines the interactions between monetary policy and stability of interbank money markets. After showing some empirical evidence of a central bank's concern for money market stability I derive a forward smoothing interest rate rule moving from an explicit target in terms of a...