effective in combating inflation, but it is shown that the optimal response to the decline in effectiveness is a stronger use of …: commitment outperforms the Taylor rule, the Taylor rule outperforms strict inflation targeting, and strict inflation targeting …

decisions on the EU-wide average of inflation and growth or should it instead focus on (appropriately weighted) national welfare … losses based on national rates of inflation and growth? We find that a central bank that minimises the sum of national … common shocks is large relative to the inflation bias and if idiosyncratic demand shocks in the non-tradables sector are not …