Using Bayesian methods, we estimate a small open economy model for Sweden. We explicitly account for a monetary regime change from an exchange rate target zone to flexible exchange rates with explicit inflation targeting. In each of these regimes, we analyze the behavior of the monetary...

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The paper discusses the choice between inflation targeting and monetary targeting as a strategy for the Eurosystem, the actual strategy the Eurosystem announced in the fall of 1998, the framework of the policy decisions appropriate for achieving the goals of the Eurosystem, the role of the...

Pattern bargaining where the tradables (manufacturing) sector acts as wage leader is a common form of wage bargaining in Europe. Our results question the conventional wisdom that such a bargaining set-up produces wage restraint. We find that all forms of pattern bargaining give the same...

The paper extends previous analysis of closed-economy inflation targeting to a small open economy with forward-looking aggregate supply and demand with some microfoundations, and with stylized realistic lags in the different transmission channels for monetary policy. The paper compares targeting...

Using a small empirical model of inflation, output, and money estimated on U.S: data, we compare the relative performance of monetary targeting and inflation targeting. The results show that monetary targeting would be quite inefficient, with both higher inflation and output variability. This is...

In recent years a growing consensus has emerged for price stability as the overriding, long run goal of monetary policy. However, despite this consensus, the following question still remains: how should monetary policy be conducted to achieve the price stability goal? This paper examines the...

Previous analysis of the implementation of inflation targeting is extended to monetary policy responses to different shocks, consequences of model uncertainty, effects of interest rate smoothing and stabilization, a comparison with nominal GDP targeting, and implications of forward-looking...

Policy rules that are consistent with inflation targeting are examined in a small macroeconometric model of the US economy. We compare the properties and outcomes of explicit 'instrument rules' as well as 'targeting rules'. The latter, which imply implicit instrument rules, may be closer to...

The purpose of the paper is to survey and discuss inflation targeting in the context of monetary policy rules. The paper provides a general conceptual discussion of monetary policy rules, attempts to clarify the essential characteristics of inflation targeting, compares inflation targeting to...