We study a simple, microfounded macroeconomic system in which the monetary authority employs a Taylor-type policy rule. We analyze situations in which the self-confirming equilibrium is unique and learnable according to Bullard and Mitra (2002). We explore the prospects for the use of ‘large...

Inflation magnifies the distorting effects of taxation when the tax treatment of interest income and expense is not fully indexed to inflation. The distortion involves a real interest tax wedge which is the difference between the real before tax interest rate that influences fully taxed...

Among the many unusual aspects of life in a very-low-inflation economy that might have been discussed, attention here has focussed on the zero lower bound on nominal interest rates. That was a wise choice, I think, for the conduct of monetary policy at or near zero nominal interest rates raises...

Operating monetary policy in a low-inflation environment is probably easier, and is certainly more constructive for the economy, than operating it in a high inflation environment.

A diverse group of economists and policymakers gathered in Woodstock, Vermont, in October 1999 to discuss the conduct of monetary policy in a low-inflation environment. The conference was held at a time when many countries had successfully reduced their inflation rates to the low single digits,...

This paper describes research comparing the response of inflation to changes in exchange rate competitiveness in various regions of the world. The paper first presents evidence that an empirical relationship between the rate of inflation and the level of the real exchange rate, which was...

This paper provides an evaluation of the effectiveness of inflation targeting in four industrial countries --New Zealand, Canada, the United Kingdom, and Sweden --focussing on the recent period of economic recovery. Evidence drawn from fmancial market data suggests that credibility of their...