inconsistency problem arising from the temptation to stimulate the economy with unexpected inflation. Although this dynamic … mechanism design problem seems complex, society can implement the optimal policy simply by legislating an inflation cap that … specifies the highest allowable inflation rate. The more severe the time inconsistency problem, the more tightly the cap …

output-inflation volatility frontier of each model for alternative specifications of the interest rate rule, subject to an …-difference of the federal funds rate responds to the current output gap and the deviation of the one-year average inflation rate … complicated rules (i.e., rules that respond to a larger number of variables and/or additional lags of output and inflation …

should be coordinated to satisfy a pair of simple specific targeting rules, a rule for (wage) inflation and a relationship …

model incorporating a cost channel for monetary disturbances and inflation rate expectations that are partly backwardlooking …, under discretion, the central bank has to be sufficiently inflation averse for the equilibrium to have these properties …

whereby the nominal interest rate is set as a function of output and inflation, and taxes are set as a function of total …. Our main findings are: First, the size of the inflation coefficient in the interest-rate rule plays a minor role for …

A monetary policy rule is a function mapping any given output level of the economy to a corresponding rate of inflation … combining an output-inflation trade-off with rational private-sector expectations we study existence and properties of time …