We examine the conduct of monetary policy in a world where the supply of outside money is controlled by the fiscal authority-a scenario increasingly relevant for many developed economies today. Central bank control over the long-run inflation rate depends on whether fiscal policy is Ricardian or...

The notion of targets and instruments is basic to the conceptual framework that economists have used to bring economic analysis to bear on practical issues of how central banks can and/or should conduct monetary policy. This paper surveys the literature of targets and instruments of monetary...

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...

The book considers issues relevant to the European Central Bank in refining and communicating its strategy. It offers a historical assessment of the Bundesbank's strategy of monetary targeting conducted from 1974 to 1998. In contrast to several other prominent studies it is argued that money...

The purpose of this paper is to review and evaluate the most important existing criticisms of policy strategies that feature adherence to money stock targets. Four main categories of criticism (and counterargumerits) are analyzed. The first of these involves the claim that accurate money stock...

We consider the properties of two monetary policy rules ('strict inflation targeting', 'constant money growth rule') in an intertemporal equilibrium model with flexible prices in which monetary policy is 'active', while fiscal policy is 'passive'. Specifically, we assume that the fiscal agent...