This paper extends a standard New Keynesian model to describe the effects of anticipated shocks to inflation and …

-specific output gaps and inflation rates, we find that performance of the optimal policy rule can be closely approximated by a very … simple rule that targets a weighted average of aggregate wage and price inflation rates. In contrast, some commonly …-prescribed policy rules (such as strict price inflation targeting and Taylor's rule) perform very poorly in terms of social welfare …

inflation in the durable goods sector. We then analyze the optimal Taylor rule for this economy. If the monetary authority wants … to stabilize the aggregate output gap, it places much more emphasis on stabilizing durable goods inflation (relative to … its share of value-added in the economy). In contrast, if the monetary authority values stabilizing aggregate inflation …

In closed or open economy models with complete markets, targeting core inflation enables monetary policy to maximize … is high. We develop an open economy model with incomplete financial markets to show that headline inflation targeting … headline inflation, assigns zero weight to import prices. …

This paper studies monetary policy rules in a small open economy with Inflation Targeting, incomplete pass-through and …

fragility of leveraged firms in its pursuit of inflation-targeting interest rate policies. This paper develops a small …

This study examines the link between various monetary policy regimes and the ability to manage inflation and exchange … hypothesis is that a system of 'flexible inflation targeting' may be an optimal policy choice for managing these two categories … of risk. A model of inflation and exchange rate risk premiums within the context of inflation targeting is proposed …

rate both matter for determining inflation and economic activity. …

Inflation in advanced economies is low by historical standards but there is no threat of deflation. Slower economic … growth is caused by supply-side constraints rather than low inflation. Below-the-target inflation does not damage the … reputation of central banks. Thus, central banks should not try to bring inflation back to the targeted level of 2%. Rather, they …

responds to inflation and output volatility, especially during economic crises. This framework offers a promising alternative …