The authors analyze the extent to which inflation-targeting frameworks should incorporate flexibility in order to respond to asset-price misalignments and other atypical events. They examine the costs and benefits of adding flexibility to the Bank's current inflation-targeting framework, and...

An important challenge facing central banks is making decisions under uncertainty about the dynamic effects of monetary policy actions. The authors stress the importance of explicitly recognizing uncertainty about the transmission mechanism when formulating policy advice. They argue that one way...