This paper examines the effects of partial information on volatility and on the design of simple feedback rules in a rational expectations context. Previous studies have investigated these effects using small analytical models. Here we emply an empirical two-bloc model derived from the OECD...

That governments should delegate the operation of monetary policy to independent central banks is widely advocated. For a closed economy, the optimal choice results in a banker who is more conservative than the representative government, assigning a lower weight on output in her welfare...

We develop a optimal rules-based interpretation of the ''three pillars macroeconomic policy framework'': a combination of a freely floating exchange rate, an explicit target for inflation, and a mechanism than ensures a stable government debt-GDP ratio around a specified long run. We show how...

This paper provides a comprehensive assessment of the open economy aspects of the 'delegation game' in which the operation of monetary policy is delegated to independent and `conservative' central bankers with a greater dislike of inflation than the public. When all countries optimally and...