Economists and policy-makers have long sought the ideal framework for monetary policy as it is arguably one of the most important tools for government to influence the economy. Exchange rate and inflation are believed to be the most appealing anchors for providing guidance to the conduct of...

This article compares two types of monetary policy rules - the Taylor-Rule and the Orphanides-Rule - with respect to their forecasting properties for the policy rates of the European Central Bank. In this respect the basic rules, results from estimated models and augmented rules are compared....

This article compares two types of monetary policy rules - the Taylor-Rule and the Orphanides-Rule - with respect to their forecasting properties for the policy rates of the European Central Bank. In this respect the basic rules, results from estimated models and augmented rules are compared....

We study the characteristics of inflation targeting as a shock absorber, using quarterly data for a large panel of countries. To overcome an endogeneity problem between monetary regimes and the likelihood of crises, we propose to study large natural disasters. We find that inflation targeting...

This paper assumes that a central bank commits itself to maintaining an inflation target and then asks what measure of the inflation rate the central bank should use if it wants to maximize economic stability. The paper first formalizes this problem and examines its microeconomic foundations. It...

The implications of uncertain policy preferences for the targeting and contracting approaches to monetary policy are investigated. It is shown that, in the presence of uncertain preferences, a linear incentive contract in the sense of Walsh performs better than an explicit inflation target as...

We theoretically examine under which assumptions the impossible trinity holds. We also focus on the most recent Swiss experience and ask, if the SNB gained monetary independence by switching from a fixed to a floating exchange rate system in January 2015. The theoretical examination shows that...

We theoretically examine under which assumptions the impossible trinity holds. We also focus on the most recent Swiss experience and ask whether the SNB gained monetary independence by switching from a fixed to a floating exchange rate system in January 2015. The theoretical examination shows...

This working paper offers some considerations on the monetary policy framework of the European Central Bank. The trade-offs arising from adopting a point target configuration over a range target one are assessed in terms of their flexibility vs. inflation anchoring properties. This layout is...