This paper explores optimal policy design in an estimated model of three small open economies: Australia, Canada and New Zealand. Within a class of generalized Taylor rules, we show that to stabilize a weighted objective of output, consumer price inflation and nominal interest variation optimal...

This paper offers several contributions to actual research and discussion on monetary policy. It clarifies the relationship between uncertainty of inflation persistence and optimal monetary policy and discusses the consequences of the recent Blanchard proposal to implement a higher inflation...

Recent contributions have shown that it is possible to account for the so-called consumptionreal exchange anomaly in models with goods market frictions where international asset trade is limited to a riskless bond. In this paper, we consider a more realistic international asset market structure...