Monetary policy must consider the bi­directional relationship between the economy and its central bank. It should therefore address two essential questions: first, how changes in the economy induce a reaction by the central bank, and second, how these policy changes are in turn transmitted to the economy. The essays in this volume present and discuss some recent advances in research on monetary policy rules and monetary trans­mission mechanisms. In addressing these issues, the papers take a variety of approaches, from case studies on developed and emerging economies to cross-country empirical analyses, and from theoretical models to historical narrative. Together they clarify some key issues of monetary policy, such as the tradeoff between output and inflation volatilities, the importance of central bank credibility, the additional complexities of policymaking in open economies, and the limits that uncertainty places on policy decisions.Monetary Policy Functions and Transmission Mechanisms: An Overview / Norman Loayza, Klaus Schmidt-Hebbel -- The Monetary Transmission Mechanism and the Evaluation of Monetary Policy Rules / John B. Taylor -- Policy Rules and External Shocks / Laurence Ball -- Optimal Monetary Policy Rules when the Current Account Matters / Juan Pablo Medina, Rodrigo O. Valdés -- Optimal Monetary Policy Rules under Inflation Range Targeting / Juan Pablo Medina, Rodrigo O. Valdés -- Monetary Policy in Latin America in the 1990s / Vittorio Corbo -- The Effect of Uncertainty on Monetary Policy: How Good are the Brakes? / Adam Cagliarini, Guy Debelle -- Monetary Policy in Chile: A Black Box? / Ángel Cabrera, Luis Felipe Lagos -- Does Inflation Targeting Increase Output Volatility?: An International Comparison of Policymakers' Preferences and Outcomes / Stephen G. Cecchetti, Michael Ehrmann -- Optimal Monetary Policy in a Small, Open Economy: A General-Equilibrium Analysis / Charles T. Carlstrom, Timothy S. Fuerst -- Policy Biases when the Monetary and Fiscal Authorities Have Different Objectives / Herman Bennett, Norman Loayza -- The Monetary Transmission Mechanism in the United Kingdom: Pass-Through and Policy Rules / Alastair Cunningham, Andrew G. Haldane -- The Monetary Policy Transmission Mechanism and Policy Rules in Canada / David Longworth, Brian O'Reilly -- Monetary Policy Rules and Transmission Mechanisms under Inflation Targeting in Israel / Leonardo Leiderman, Hadas Bar-Or -- Estimating Monetary Policy Rules for South Africa / Janine Aron, John Muellbauer.