We develop a general mandate framework for delegating monetary policy to an instrument-independent, but goal-dependent central bank. The goal of the mandate consists of: (i) a simple quadratic a loss function that penalizes deviations from target macroeconomic variables; (ii) a form of a...

Optimal monetary policy studies typically rely on a single structural model and identification of model-specific rules that minimize the unconditional volatilities of inflation and real activity. In our proposed approach, we take a large set of structural models and look for the model-robust...

In models of monetary policy, discretionary policymaking often lacks the ability to manage public beliefs, which explains the theoretical appeal of policy rules and commitment strategies. But as shown in this paper, when a policymaker possesses private information, belief management becomes an...

How does the need to preserve government debt sustainability affect the optimal monetary and fiscal policy response to a liquidity trap? To provide an answer, we employ a small stochastic New Keynesian model with a zero bound on nominal interest rates and characterize optimal time-consistent...

Discretionary policymakers cannot manage private-sector expectations and cannot coordinate the actions of future policymakers. As a consequence, expectations traps and coordination failures can occur and multiple equilibria can arise. To utilize the explanatory power of models with multiple...

This paper examines jointly optimal monetary and macroprudential policies through the lens of targeting rules that are both implementable and optimal. Based on a DSGE framework that features nominal rigidity, housing, and an incomplete financial market, our targeting rules outperform an optimal...

We analyze the characteristics of optimal dynamics in an economy in which neither prices nor wages adjust instantaneously and lump-sum taxes are unavailable as a source of government finance. We then propose that monetary and fiscal policy should be coordinated to satisfy a pair of simple...

The purpose of the paper is to survey and discuss inflation targeting in the context of monetary policy rules. The paper provides a general conceptual discussion of monetary policy rules, attempts to clarify the essential characteristics of inflation targeting, compares inflation targeting to...

Both price level targeting and speed limit policies have been suggested as alternatives to inflation targeting that may confer benefits when a central bank operates under discretion, even if society's loss function is specified in terms of inflation (instead of price level) volatility. Here we...