This paper studies the relative performance of alternative monetary policy rules in the presence of oil price shocks in a small open economy optimizing model. Our analysis shows that it is important to distinguish between alternative price indices (CPI, core CPI, and GDP deflator) when modeling...

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...