In a forward-looking business cycle model, central banks can achieve the (timeless)optimal commitment equilibrium even in the absence of a commitment technology, if they are delegated with an objective function that is different from the societal one. The paper develops a general...

We examine how monetary policy has been conducted in four early adopters of Inflation Targeting: Brazil, Chile, Colombia and Peru. First, a Markov-Switching approach shows that while all countries exhibit considerable stability in their responses to the inflation and output gaps, most have...

We extend Ruge-Murcia (2003, 2004) to weigh inflation and output and show that empirical evidence supports an asymmetric preference hypothesis for output. We also find evidence that the monetary authority targets potential output in parallel to Barro and Gordon (1983).

Although the adoption of inflation targeting can, on average, bring benefits to developing countries, however, adopting this scheme is not necessarily sufficient to mitigate the time-inconsistency problem of monetary policy. The present paper makes use of two theoretical models in order to...

During the summer of 2009, Belgium and the euro area, as well as other industrialised countries, recorded negative inflation rates. Although they were the direct result of sharply falling commodity prices in the second half of 2008, policy-makers and the general public wondered whether this...

Monetary policy, inflation and economic growth: the influence of the monetary authority?s reputation upon the economy The following paper aims to show that, although a monetary policy, which merely seeks to control inflation through an interest rate rule (under inflation targeting), may reach...

More than a decade after its onset on the path of transition from communism, Romania continues to face problems of transparency in fiscal operations, difficulties in liquidity management, persistent inflation and currency devaluations, and a generally unstable economic environment. This...

In this paper, we examine the performance and robustness of optimized interest-rate rules in four models of the euro area that differ considerably in terms of size, degree of aggregation, relevance of forward-looking behavioral elements, and adherence to microfoundations. Our findings are...

Inflation targeting and price-making in monetary economies: is it possible to conciliate growth with price stability? - Recently a number of countries have adopted explicit inflation targets as a guide for policy since a numerical target is attractive for anchoring inflation expectations....