In this paper we systematically evaluate how central banks respond to deviations from the inflation target. We present … a stylized New Keynesian model in which agents' inflation expectations are sensitive to deviations from the inflation … inflation exceeded the target in the past. Moreover, the central bank responds non-linearly to past inflation gaps. This is …

in the exchange rate but consider them only to the extent they impact on the expected inflation and output path. …

” model (BGG), to which we augment a banking sector. We first study the impact of a negative shock to entrepreneurs' net worth … and a positive monetary policy shock on business cycle fluctuations. We then look at the impact of a negative net worth … shock on business cycle fluctuations when the minimum capital requirement increases from 8 percent to 12 percent. Our …

-reform regime is characterized by high inflation, passive monetary policy and persistent responses to shocks. The post-reform regime … is characterized by low inflation, active and credible monetary policy and markedly less persistent responses to shocks …

In the last two decades, there have been important changes in inflation dynamics in Turkey. While average inflation … rate, inflation volatility and inflation persistence declined, the prices of tradable goods have shown an increase less … did have an effect on domestic inflation rate and that Phillips Curve got flatter. …