How and under what circumstances can adjusting the inflation target serve as a stabilization-policy tool and contribute to welfare improvement? We answer these questions quantitatively with a standard New Keynesian model that includes cost-push type shocks which create a trade-off between...

Does raising an inflation target require increasing the nominal interest rate in the short run? We answer this question using a standard New Keynesian model with rich backward-looking elements. We first analytically show that the short-run comovement between inflation and the nominal interest...

Would raising the inflation target require an increase in the nominal interest rate in the short run?We answer this policy question, first analytically in a small-scale New Keynesian model with backward-looking components where a closed-form solution exists, and then in a medium-scale model of...

We study the welfare implication of average inflation targeting as a simple interest-rate rule, in which the monetary authority adjusts its short-term policy rate in response to the output gap as well as average inflation deviation from its target instead of reacting to the contemporaneous...

We analyze money financing of fiscal transfers (helicopter money) in two simple New Keynesian models: a "textbook" model in which all money is non-interest-bearing (e.g., all money is currency), and a more realistic model with interest-bearing reserves. In the textbook model with only...

This paper investigates the role of observed official inflation-target adjustments in aggregate macroeconomic fluctuations in Indonesia, using an estimated Dynamic Stochastic General Equilibrium (DSGE) model. The paper finds that these adjustments or shocks play a non-trivial role in the...

How and under what circumstances can adjusting the inflation target serve as a stabilization-policy tool and contribute to welfare improvement? We answer these questions quantitatively with a standard New Keynesian model that includes cost-push type shocks. Our proposed inflation target rule...

This article aims to examine the monetary policy rule under an inflation targeting in Mongolia with a focus on its conformity to the Taylor principle, through two kinds of approaches: a monetary policy reaction function by the generalized-method-of-moments (GMM) estimation and a New Keynesian...

This paper analyzes changes in the monetary policy in the Czech Republic, Hungary, and Poland following the policy shift from exchange rate targeting to inflation targeting around the turn of the millennium. Applying a Markovswitching dynamic stochastic general equilibrium model, switches in the...