Does the practice of inflation targteting reflect sound economic principles? Certainly, the inflation-targeting regime in New-Zealand has been subject to considerable academic scrutiny along these lines. I suggest, however, that some other questions are more interesting for today's discussion....

Two features distinguish European and US labor markets. First, most European countries have substantially more generous unemployment insurance. Second, the duration of unemployment and employment spells are substantially higher in Europe - employment turnover is lower. We show that...

We demonstrate the existence of a monetary policy tradeoff between price-inflation variability and output-gap variability in an optimizing-agent model with staggered nominal wage and price contracts. This variance tradeoff is absent only in the special case in which prices are sticky and wages...

Policy rules that are consistent with inflation targeting are examined in a small macroeconometric model of the US economy. We compare the properties and outcomes of explicit "instrument rules" as well as "targeting rules". The latter, which imply implicit instrument rules, may be closer to...