The aim of this paper is to determine whether it would be desirable from the perspective of macroeconomic balance for central banks to take account of nominal exchange rate movements when framing monetary policy. The theoretical framework is a small, open DSGE economy that is closed by a Taylor...

This work describes the main characteristics of an inflation targeting regime and derives the optimal solution for interest rates according to an original methodology for two models based on the Phillips and IS curves containing general exogenous variables and a complete loss-function

I study how the zero bound on nominal interest rates affects optimal discretionary monetary policy within the standard New Keynesian framework. I find that the non-negativity constraint implies an optimal policy which is more expansionary and more aggressive near the zero bound compared to the...

An issue with monetary policy rules to guide inflation is the indeterminacy of the price level. In the context of a traditional backward-looking and a modern forward-looking New-Keynesian Phillips curve, this paper examines the dynamic and steady state properties of interest rate rules anchored...