Andy Rose’s paper provides important evidence on the impact on how monetary regimes fared during the recent global financial crisis. The paper has two basic results. First, it shows that the two monetary regimes, hard fixing and inflation targeting, have become surprisingly durable and were able to withstand the stress of the shocks from the global financial crisis. Before the global financial ...

I report some personal views and reflections on transparency experiences and transparency challenges following my first year and a half as Deputy Governor at Sveriges Riksbank regarding (1) flexible inflation targeting, (2) the role of transparency in inflation targeting and committee decisions on instrument-rate paths, (3) the management of interest-rate expectations, and (4) the publishing of...

Speed limit policy, a monetary policy strategy that focuses on stabilizing inflation and the change in the output gap, consistently delivers better welfare outcomes than flexible inflation targeting or flexible price level targeting in empirical New Keynesian models when policymakers lack the ability to commit to future policies. Even if the policymaker can commit under an inflation targeting s...

Several European countries adopted inflation targeting as a monetary policy strategy during the 1990s. This article evaluates the impact of the establishment of this policy framework on the dynamics of inflation for three countries: United Kingdom, Spain and Finland. While smaller shocks triggered most of the decline in their high frequency inflation volatility, this is not always the case for ...

This paper compares the performances of three alternative nominal anchors, i.e., price inflation, nominal income growth, and money growth in an estimated monetary business cycle model. The representative household’s lifetime utility is used as a natural welfare metric, and the welfare effects of the non-linear dynamics are captured by a quadratic approximate solution method. Strict inflation ta...

Many countries in the developing world have adopted an approach to monetary policy that focuses on maintaining a low level of inflation, to the exclusion of other important objectives such as employment generation, increasing investment or reducing poverty, despite the widespread evidence that moderate levels of inflation have few or no costs. Some have even adopted formal " inflation targeting...

This paper investigates the consequences of debt stabilization for inflation targeting. If the monetary authority perfectly stabilizes inflation while the fiscal authority holds constant the real value of debt at maturity, the equilibrium dynamics might be indeterminate. However, determinacy can be restored by committing to targeting rules for either monetary or fiscal policy that include a con...

This paper argues that inflation-targeting central banks should announce explicit loss function with numerical relative weights on output-gap stabilization and use and announce optimal time-varying instrument-rate paths and corresponding inflation and output-gap forecasts. Simple voting procedures for forming the Monetary Policy Committee’s aggregate loss function and time-varying instrument-ra...