This paper analyses optimal monetary policy in response to shocks using a model that avoids making specific assumptions about the stickiness of prices, and thus the nature of the Phillips curve. Nonetheless, certain robust features of the optimal monetary policy commitment are found. The optimal...

This paper examines whether central banks in Latin America have implemented conventionalinflation targeting (IT) prescriptions, with a focus on foreign exchange intervention and officialreserves accumulation policies. To this end, the paper reviews the experiences of Brazil, Chile,Colombia, and...

On 11-12 May 2011, SUERF and the Belgian Financial Forum, in association with the Brussels Finance Institute and the Centre for European Policy Studies (CEPS) organized the 29th SUERF Colloquium “New Paradigms in Money and Finance?” All the papers in the present SUERF Study are based on...

While the IS/LM-AS/AD model is still the central tool of macroeconomic teaching in most macroeconomic textbooks, it has been criticised by several economists. Colander [1995] has demonstrated that the framework is logically inconsistent, Romer [2000] has shown that it is unable to deal with a...

This paper analyzes the relationship between the optimal weight on output gap in the central bank's loss function and the degree of inertia in a hybrid version of New Keynesian model with a pure discretionary inflation targeting. I show that under endogenous persistence of inflation dynamics,...

Following the Asian financial crisis in 1997-98, a number of Asian central banks adopted inflation targeting. While it is possible for the average inflation rate to be close to target, deviations of inflation could nevertheless be large and protracted. We therefore explore how successful this...

We estimate small open economy models in which inflation targeting central banks respond to a discounted infinite sum of expected inflation and output gaps (Calvo-type rules). The results support Calvo-type rules for Australia and Canada, and suggest longer targeting horizons for inflation...

This paper estimates the treatment effect of inflation targeting on macroeconomic variables using a semiparametric single index method by taking into account the model misspecification of parametric propensity scores. Our study uses a broader set of preconditions for inflation targeting and...

The article compares the social efficiency of monetary targeting and inflation targeting when central banks may have private information on shocks to money demand and the transparency solution is not feasible because of verifiability problems. Under inflation targeting and monetary targeting,...