This paper examines the performance of inflation forecast feedback rules in a two-sector, calibrated model of the U.K. economy. Under such rules, the interest rate responds to the deviation of the unchanged-interest-rate forecast of inflation from the inflation target. We find that this...

This paper evaluates the welfare cost of business cycles and the effects of monetary policies in a DSGE model tailored to a small open emerging economy. The model generates rich business cycle fluctuations, features labor market idiosyncratic risks and accounts for imperfect financial and...