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 ...

Chile was one of the world’s fastest-growing economies in the 1990s. Its growth rate of 6.8 percent per year from 1990 to 2000 (inclusive) was the seventh highest in the world, and by far the highest in Latin America. Poverty was halved, and while this was overwhelmingly due to growth rather than a ...

Monetary policy in small open economies is typically cast as a choice between an exchange rate anchor (fixed or predetermined exchange rates) and a money anchor (floating exchange rates). Under such regimes, the growth rate of the nominal anchor is set according to the desired long-run inflation rate. ...

What is the optimal monetary policy, and how can the central bank implement it? Both questions have been extensively studied, but always in the context of simple theoretical structures, which by design are limited in their ability to account for actual observed business cycle fluctuations. This article ...

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 ...

Inflation targeting has become an increasingly popular approach to the conduct of monetary policy worldwide since the early 1990s. Most of the countries that have adopted inflation targeting judge the experiment favorably, at least thus far. In many countries, the adoption of inflation targeting has ...

Three parallel and certainly not independent changes have occurred in central bank practices over the past fifteen years. The first is the spread of central bank independence, which is tied to the notion that even when the government plays a role in setting the goals of monetary policy, central banks ...

After a long history of high and volatile inflation, the Central Bank of Chile began implementing its monetary policy in the early 1990s by announcing yearly targets for inflation. This new framework was the first step toward a full-fledged inflation-targeting setup, although the Central Bank continued ...

Since the mid-1970s, the macroeconomic consequences of wage indexation has been the subject of considerable research. Starting with an enthusiastic proposal for indexation by Friedman (1974) and two influential papers by Gray (1976) and Fischer (1977), the academic literature has examined the effects ...

When inflation is chronic, firms develop indexation practices that automatically tie the growth of prices, wages, and other contracts to the performance of some comprehensive price index. The microeconomic advantages of indexation are evident and derive from the immunization of the relative price ...