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Robust learning stability with operational monetary policy rules
The recent literature examines the conduct of monetary policy in terms of interest rate rules from the viewpoint of imperfect knowledge and learning by economic agents. The stability of the rational expectations equilibrium is taken as a key desideratum for good monetary policy design. Most of this ...
Inflation targeting under imperfect knowledge
A central tenet of inflation targeting is that establishing and maintaining well-anchored inflation expectations are essential. Well-anchored expectations enable inflation-targeting central banks to achieve stable output and employment in the short run, while ensuring price stability in the long run. ...
Exchange rate interventions and insurance: is fear of floating a cause for concern?
Fear of floating has recently come to be seen as one of the central de facto characteristics of exchange rate regimes in emerging markets, after first being identified by Calvo and Reinhart (2002). The interpretation of this phenomenon is still open to question. Does the optimal monetary regime for ...
Inflation targeting: an overview
After the emergence of a consensus in the 1980s on the harmful effects of inflation, the last decade of the twentieth century witnessed a market reduction in inflation rates across the world. By the end of the 1980s, empirical evidence collected from large cross-country analyses and numerous case ...
Optimal monetary policy rules when the current account matters
Policymarkers and the academic community have reached an increasing consensus during the last two decades: the primary objective of monetary policy should be to control inflation (see, for example, King, 1999). A less settled issue is the appropriate role of the central bank regarding other, secondary ...
Policy responses to external shocks: the experiences of Australia, Brazil, and Chile
Open economies, particularly emerging markets and commodityintensive economies, deal with large external shocks. These are typically of a financial nature in the case of the former and real—in that they affect the terms of trade—in the case of the latter. Alternative policy reactions and policy setups ...
Inflation dynamics in a small open economy model under inflation targeting: some evidence from Chile
Following the influential work of Christiano, Eichenbaum, and Evans (2005) and Smets and Wouters (2003), many central banks are building and estimating dynamic stochastic general equilibrium (DSGE) models with nominal rigidities and are using them for policy analysis. This new generation of sticky ...
Optimal inflation targeting: further developments of inflation targeting
Inflation targeting was first introduced in 1990, in New Zealand. Since then it has been adopted by more than twenty countries. This period of fifteen years has seen major progress in practical monetary policy. In particular, the practice of inflation targeting has led to a more systematic and consistent ...
It's not factor accumulation: stylized facts and growth models
The central problem in understanding economic development and growth is not, in fact, to understand the process by which an economy raises its savings rate and increases the rate of physical capital accumulation. Many development practitioners and researchers continue to target capital accumulation ...