Beginning with the Reserve Bank of New Zealand Act of 1989, central banking reforms have focused on assigning clear goals for which monetary policy authorities can be held accountable. Inflation targeting regimes provide examples of such goal-based policy frameworks. An alternative approach, recently argued for by John Taylor (2012, 2014), relies on a rule-based framework in which the policy au...

We examine the extent to which monetary policy should respond movements in sectoral inflation rates using a Generalized Taylor model that takes specific account of make-up consumer price index. calibrate for each sector UK microdata. find rule allowing different responses sectors outperforms targeting only aggregate inflation, as does responding core inflation. However, we optimal leads small a...

We show that a monetary policy rule uses the exchange rate to stabilize economy can outperform Taylor in managing macroeconomics fluctuations and achieving higher welfare. The differences between rules are driven by: (i) paths of nominal interest under each (ii) external habits consumption, which leads deviations from uncovered parity. These larger economies, very open, more exposed foreign sho...

Following recent episodes of financial distress, the interaction between monetary policy and asset price fluctuations has gained renewed attention. Here, we assess the role of asset price misalignments in monetary policy in an adaptive learning context. Our model first extends Bullard and Mitra (2002), including an additional role for asset prices. From the point of view of the E-Stability crit...