Recent models of monetary policy can have indeterminacy of equilibria. The indeterminacy property is often viewed as a difficulty of these models. We consider its significance using the learning approach to expectations formation by employing expectational stability as a robustness criterion for...

In the first part of this paper I use a small macroeconomic model to examine the causes of the appreciation of sterling during 1979-81. Oil takes about half of the blame. Contractionary monetary policies alone do not seem sufficient to explain the rest, but when coupled with adverse supply-side...

This survey essay considers how rational expectations have changed our evaluation of monetary policy. In the first section, various underpinnings of the "Phillips curve" relation between inflation and output are reviewed. All are concluded to be products of particular institutional set-ups whose...

Central banks have become increasingly transparent during the last decade. One of the main benefits of transparency predicted by theoretical models is that it enhances the credibility, reputation, and flexibility of monetary policy, which suggests that increased transparency should result in...

One of the most striking macroeconomic phenomena in recent decades has been the achievement of rather low and more stable rates of inflation in many countries. Consequently, the main goal of this Paper is to offer an overview of the main policy issues arising in a low inflation environment and...

We provide an up-to-date overview of the literature on the desirability of central bank transparency from an economic viewpoint. Since the move towards more transparency, a lot of research on its effects has been carried out. First, we show how the theoretical literature has evolved, by looking...

Leith and Wren-Lewis (2007) have shown that government debt is returned to its pre-shock level in a New Keynesian model under optimal discretionary policy. This has two important implications for monetary and fiscal policy. First, in a high-debt economy, it may be optimal for discretionary...

We consider a simple general equilibrium model for the determination of asset prices together with full equilibria in the commodity and money markets. In this way portfolio aspects are introduced into a dynamic macro model which has many features from growth theory. Money holdings are modelled...

We examine empirically whether asset prices and exchange rates may be admitted into a standard interest rate rule, using data for the US, the UK and Japan since 1979. Asset prices and exchange rates can be employed as information variables for a standard `Taylor-type' rule or as arguments in an...

This paper has two aims. First, it provides simple theoretical models that highlight two channels whereby monetary shocks have permanent real effects and the interactions between these channels. Second, it presents an empirical dynamic model, covering a panel of EU countries, and derives the...