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...

This paper is an application of the framework developed in Pinkwart (2010a), which allows to analyze changes of the monetary policy regime under uncertain inflation dynamics that alter the steady state properties of the underlying model as well as the stochastic dependencies between model...