The notions of instrument, intermediate target and final target are defined in the context of the cointegrated VAR. A target variable is said to be controllable if it can be made stationary around a desired target value by using the instrument. This can be expressed as a condition on the...

As an emerging economy, Turkey is an interesting case study because it was one of the hardest hit countries by the crisis, with a year-over-year contraction of 15 percent during the first quarter of 2009. At the same time, anticipating the fallout from the crisis, the Central Bank of the...

We compare two widely used pricing assumptions in the New-Keynesian literature: the Calvo and Rotemberg price-setting mechanisms. We show that, once trend in?ation is taken into account, the two models are very different. i) The long-run relationship between inflation and output is positive in...

We study the design of optimal monetary policy (Ramsey policies) in a model with sticky prices and unionized labour markets. Collective wage bargaining and unions monopoly power tend to dampen wage fluctuations and to amplify employment fluctuations relatively to a DNK model with walrasian...

This paper uses real-time briefing forecasts prepared for the Federal Open Market Committee (FOMC) to provide estimates of historical changes in the design of U.S. monetary policy and in the implied central-bank target for inflation. Empirical results support a description of policy with an...

This paper examines the role of monetary policy in an environment with aggregate risk and incomplete markets. In a two-period overlapping-generations model with aggregate uncertainty and nominal bonds, optimal monetary policy attains the ex-ante Pareto optimal allocation. This policy aims to...

This paper quantifies the deterioration of achievable stabilization outcomes when monetary policy operates under imperfect credibility and weak anchoring of long-term expectations. Within a medium-scale DSGE model, we introduce through a simple signal extraction problem, an imperfect knowledge...

The purpose of this paper is to make a quantitative contribution to the inflation versus price level targeting debate. It considers a policy-maker that can set policy either through an inflation targeting rule or a price level targeting rule to minimize a quadratic loss function using the actual...

Unemployment in the United Kingdom has fallen from high European-style levels to US levels. I argue that the key reasons are the reform of monetary policy, in 1993 with the adoption of inflation targeting and in 1997 with the establishment of the independent Monetary Policy Committee, and second...