During the past three years, central banks have faced challenges that few foresaw during the period known as the Great Moderation. During the crisis, central banks have responded with traditional interest rate tools, been forced to deal with the zero lower bound on nominal interest rates, and...

New Zealand was successful in switching from a moderate inflation regime to a low-inflation regime between 1986-92. This success is attributable both to a restrictive monetary policy, political support for the policy, and wide-ranging institutional reforms in the economy--including important...

This paper surveys the implications of uncertainty for the design of monetary policy. Among the topics discussed are the impact of imperfect or noisy information on the performance of simple rules, the performance of rules that are robust to the exogenous disturbance processes, the effects of...

We parameterize central-bank independence in terms of partisanship and term length, and we focus on the implications of alternative policy structures for real economic activity. While long terms of office for the central banker can reduce the role of electoral surprises, term lengths that are...

In a standard New Keynesian model, a myopic central bank concerned with stabilizing inflation and changes in the output gap will implement a policy under discretion that replicates the optimal, timeless perspective, precommitment policy. By stabilizing output gap changes, the central bank...

Central banks often make announcements even though, in models in which dynamic time inconsistency of optimal policy plays a role, they have an incentive to lie. This paper studies the way inflation targeting affects the incentives the central bank faces in announcing its target inflation rate...

In this paper, a simple search model of the labor market is combined with sticky prices to investigate the dynamic response of the economy to nominal interest rate shocks. The framework allows the respective roles of labor market search, nominal price rigidities, and policy inertia in accounting...

The 1989 Reserve Bank of New Zealand Act provides a natural experiment in which the effects of institutional change on economic relationships can be studied. The Act set price stability as the single objective of monetary policy and gave the Bank great independence in achieving that goal. We...

Central banks often make announcements even though, in models in which dynamic time inconsistency of optimal policy plays a role, they have an incentive to lie. This paper studies the way inflation targeting affects the incentives the central bank faces in announcing its target inflation rate...

In this paper, we evaluate the consequences of super-active fiscal policy rules - that is, rules that call for tax cuts and/or spending increases as the government's debt level rises - in a standard New Keynesian model subject to an occasionally-binding zero lower bound on the monetary policy...