Inflation Targeting and Macroeconomic Stabilization

Inflation Targeting and Output Stabilization in Australia

a number of countries, including Australia, over the past decade. The adoption of a framework that focuses explicitly on inflation reflects the growing realization that the major contribution that monetary policy can make to economic growth and welfare in the long run is the maintenance of a low and stable inflation rate. Empirical evidence confirms the detrimental effects of higher inflation o...

Inflation Targets and Inflation Targeting

There is widespread agreement that price stability (in practice, low and stable inflation) should be an objective of monetary policy. This agreement is reflected both in the mandates set for monetary policy by governments and in the practice of central banks. Several other important questions about the objectives for monetary policy are less settled: Should there be other objectives? If there a...

Nber Working Paper Series Optimal Inflation Stabilization in a Medium-scale Macroeconomic Model

This paper characterizes Ramsey-optimal monetary policy in a medium-scale macroeconomic model that has been estimated to fit well postwar U.S.\ business cycles. We find that mild deflation is Ramsey optimal in the long run. However, the optimal inflation rate appears to be highly sensitive to the assumed degree of price stickiness. Within the window of available estimates of price stickiness (b...

Inflation Band Targeting and Optimal Inflation Contracts

Interest Rate Rules and Macroeconomic Stabilization

High degrees of relative risk aversion induce indeterminacy in cashin-advance economies. This paper Þnds that Taylor-style policies can pre-empt such sunspot equilibria. SpeciÞc policy recommendations depend on the fundamentals of the economy, i.e. the empirically true value of coefficient of relative risk aversion. ∗This paper was written while I was aDFG Heisenberg Fellow. I would like to tha...