An expanding body of literature holds two truths about monetary policy to be self-evident: Effective central banks must be independent from undue political interference, and they would do well to target the rate of inflation directly. The genesis of this literature may be found in the concern...

This study suggests that U.S. monetary policy has been influenced by forecasts of and past experience with three broad factors: inflation, economic activity, and the monetary aggregates. The influence of each factor has varied, however, within this common theme. In the past 22 years at least two...

Numerous recent studies on macroeconomic policy--including monetary policy and tax policy--have incorporated private information in their models of the economy. In such models, characterization of Pareto-optimal allocations is an important step of analysis. In this article, we study Pareto...

In simple sticky-price models, the guiding principle for optimal monetary policy is to stabilize nominal prices so as to eliminate the distortions associated with price adjustment. If there is only one sector, or one category of consumption goods, then stabilizing nominal prices means making the...

A consensus now exists that central banks, which possess a monopoly over the creation of fiat money (the monetary base), control trend inflation. But how do they exercise this control, especially given that their use of the interest rate as the policy instrument renders money endogenous...