This paper compares the properties of interest rate rules such as simple Taylor rules and rules that respond to price-level fluctuations — called Wicksellian rules — in a basic forward-looking model. By introducing appropriate history dependence in policy, Wicksellian rules perform better...

This paper compares the properties of interest rate rules such as simple Taylor rules and rules that respond to price-level fluctuations - called Wicksellian rules - in a basic forward-looking model. By introducing appropriate history dependence in policy, Wicksellian rules perform better than...

We study the properties of the optimal nominal interest rate policy under different levels of price indexation. In our model indexation regulates the sources of inflation persistence. When indexation is zero, the inflation gap is purely forward- looking and inflation persistence depends only on...

We study the market-perceived monetary policy rule of the Bank of England (BoE) using financial market data and macroeconomic surprises. Leveraging exogenous variations in inflation and industrial production (IP) surprises around Office for National Statistics releases, we estimate gilt yield...

The correlation between persistent changes in the markup in one sector of an economy and the inflation rate is quantified in a 2-sector dynamic general equilibrium model. How this relationship is affected by monetary policy is also studied. We find that the correlation is in general positive...

This paper estimates Taylor rules featuring instabilities in policy parameters, switches in policy shocks' volatility, and time-varying trend inflation using post-WWII U.S. data. The model embedding the stochastic target performs better in terms of data-fit and identification of the changes in...

This paper estimates regime-switching monetary policy rules featuring trend inflation using post-WWII US data. We find evidence in favour of regime shifts and time-variation of the inflation target. We also find a drop in the inflation gap persistence when entering the Great Moderation sample....

This paper investigates the performance of optimised interest rate rules when there is uncertainty about a key determinant of the monetary transmission mechanism, namely the degree of persistence characterising the inflation process. The paper focuses on the euro area and utilises two variants...

The combination of discretionary monetary policy, labor-market distortions and nominal wage rigidity yields an inflation bias as monetary policy tries to exploit nominal wage contracts to address labour-market distortions Although an inflation target eliminates this inflation bias, it creates a...

This paper demonstrates how a target for money growth can be beneficial for an inflation targeting central bank acting under discretion. Because the growth rate of money is closely related to the change in the interest rate and he growth of real output, delegating a money growth target to the...