In a linear rational expectations two-country model, using an aggregate demand, aggregate supply framework, we analyse the effects of the adoption of an inflation-targeting regime on exchange rate volatility and the possible scope for policy coordination. This analysis is conducted using...

In this paper we model the volatility of the spread between the overnight interest rate and the central bank policy rate (the policy spread) for the euro area and the UK during the two main phases of the financial crisis that began in late 2007. During the crisis, the policy spread exhibited...