Should central banks, because of the zero-lower-bound problem, raise their inflation-rate targets? Several arguments are relevant. (1) In the absence of the ZLB, the optimal steady-state inflation rate, according to standard New Keynesian reasoning, lies between the Friedman-rule value of...

Central banks often make announcements even though, in models in which dynamic time inconsistency of optimal policy plays a role, they have an incentive to lie. This paper studies the way inflation targeting affects the incentives the central bank faces in announcing its target inflation rate...

Central banks often make announcements even though, in models in which dynamic time inconsistency of optimal policy plays a role, they have an incentive to lie. This paper studies the way inflation targeting affects the incentives the central bank faces in announcing its target inflation rate...