We investigate the effectiveness of an aggressive anti-inflation monetary policy on the ability of agents to achieve rational expectations equilibrium (REE) forecasts of inflation. An aggressive anti-inflation policy includes a willingness to respond more forcefully to deviations from an...

This paper investigates the effect of an aggressive price stabilizing monetary policy on the ability of agents to reach a rational expectations equilibrium (REE) for inflation and output. We provide a more robust policy implication than the one suggested by Bullard and Mitra (2002a,b). Using an...

The last decade has witnessed two groundbreaking developments in monetary economics: The growth in digital private currencies and negative interest rate policies (NIRP), leaving the zero lower bound no longer binding. These developments have introduced two parallel discussions surrounding the...

Observed inflation targets around the industrial world are concentrated at two percent per year. This chapter investigates the extent to which the observed magnitudes of inflation targets are consistent with the optimal rate of inflation predicted by leading theories of monetary non-neutrality....

This paper examines the impact of different types of oil price shocks on the U.S. economy, using a factor-augmented VAR (FAVAR) approach. The results indicate that when examining the effects of oil price shocks, it is important to account for the interaction between the oil market and the...

The Portfolio Theory of Inflation (PIT) proposed in this study investigates the role of global financial markets in determining the effectiveness of macroeconomic policy in open and fully financial integrated economies. The PIT adopts a modified version of the portfolio balance approach to...

The analysis of open macroeconomies typically assumes (implicitly or explicitly) that resource allocation decisions are taken by domestic agents. The Portfolio Theory of Inflation (PTI) developed in this study assumes that some critical allocation decisions are taken by global investors and...

This study revisits and tests empirically the Portfolio Theory of Inflation (PTI), which analyzes how the effectiveness of macroeconomic policy in open and globally financially integrated economies is influenced by global investor decisions (Bossone, The portfolio theory of inflation and policy...

Assuming inflation is a forward variable in Taylor (1999) model, this paper finds opposite policy rule recommandations with counter-cyclical policy rule parameters (Taylor principle: inflation rule larger than one and bounded upwards) in the case of optimal policy under commitment versus...