Given highly persistent cost-push shocks, the relative performance of nominal income growth targeting depends critically on the size of two key parameters. Barring extreme preferences, nominal income growth targeting performs fairly well relative to commitment and pure discretion for small...

This paper shows how the exchange rate affects the price-setting behavior of monopolistically competitive firms in the sticky price framework that gives rise to a forward-looking Phillips Curve at the aggregate level. The open economy Phillips Curve differs from its closed economy counterpart in...

This paper discusses the implementation of monetary policy in New Zealand and its flow-on effects on the 90-day bank bill rate over the 1999-2005 period. The effects of external factors are considered as well. Our findings indicate that the maturity spectrum ratio exerted a positive effect on...

In the backward-looking model, an explicit instrument rule is almost as efficient as a target rule. An explicit instrument rule leads to a more stable real rate of interest and hence an output stabilization bias compared to the target rule.

This paper investigates the theoretical implications of targeting average inflation or following a speed limit policy in a dynamic backward-looking model where monetary policy works with lags. Our findings reveal that the target horizon for expected inflation in the target rule must be correctly...

In open economy, a choice can be made between two measures of inflation for use as a target variable: CPI inflation or domestic inflation. This paper considers flexible and strict inflation targeting strategies and explores the circumstances under which a domestic inflation target is preferred...

This paper explores an issue that arises in the delegation process. The paper shows that a myopic central banker, one who treats expectations as constant in setting discretionary policy, can replicate the behavior of output and inflation under policy from a timeless perspective. For that to...