This chapter reviews the evolution of the theory of monetary policy design since the 1980s, highlighting the emerging role of central banker psychology. Three subsequent stages are evident. First, the central bank was considered as an independent institution (modern economics). Second, central...

This paper sets out to investigate the role of additive uncertainty under plausible non-standard central bank loss functions over future inflation. Building on a substantial body of evidence in the economic psychology literature, this paper postulates (i) period-by-period loss functions that are...

This paper analyzes the factors underlying the weakness of the euro. For this purpose, the framework advocated by Clarida and Gali (1994) is used. Within this model, three structural shocks drive the dynamics of the endogenous variables: aggregate supply shocks, aggregate spending shocks, and...