The purpose of the paper is to survey and discuss in‡ation targeting in the context of monetary policy rules. The paper provides a general conceptual discussion of monetary policy rules, attempts to clarify the essential characteristics of in‡ation targeting, compares in‡ation targeting to other monetary policy rules, and draws some conclusions for the monetary policy of the European System of ...

Ten years of inflation targeting in New Zealand is used to test whether monetary policy conforms to the simple rules that have been recommended in the literature. While a Taylor rule with the standard parameters used in the US describes New Zealand monetary policy quite well, the Reserve Bank has focused more strongly on price stability, as required by its Policy Targets Agreements. Monetary po...

1 Do Þnancial markets price monetary policy uncertainty? Abstract We study the impact of the uncertainty about the type of monetary policy on stock returns. We derive a model where we explicitly link fundamental uncertainty and uncertainty about the type of monetary policy and generate testable implications of their relative impacts on asset prices. We argue that investors' learning about the s...

This paper studies the design of monetary policy in a fiscal federation, such as the European Union. The focus of the analysis is the interaction between the fiscal policy of member countries (regions) and the monetary authority. Each of the countries structures its fiscal policy (spending and taxes) with the interests of its citizens in mind. Thus each country perceives a gain to shifting its ...

We estimate the effect of shifts in monetary policy using the term structure of interest rates. In our no-arbitrage model, the short rate follows a version of the Taylor (1993) rule where the coefficients on inflation and output can vary over time. We find that monetary policy loadings on inflation, but not output, changed substantially over the last 50 years. Agents tend to assign a risk disco...

Many empirical studies find robust evidence that marginal cost of production directly depends on the nominal rate of interest. This relationship induces a cost channel for monetary policy transmission. Although the empirical literature provides ample evidence for a cost channel, studies that evaluate the welfare gains from monetary policy commitment have so far entirely ignored its presence. Th...

We study interactions between monetary policy, which sets nominal interest rates, and …scal policy, which levies distortionary income taxes to …nance public goods, in a standard, stickyprice economy with monopolistic competition. Policymakers’inability to commit in advance to future policies gives rise to excessive in‡ation and excessive public spending, resulting in welfare losses equivalent t...

economic development plans normally contain some policy objectives, especially for the most important macroeconomic variables. governments are expected to take best policies to achieve these objectives, although due to some structural or other impediments they may fail to touch the objectives. we have attempted to uncover the determinants of private consumption and investment as the objectives ...

The objective of this paper is to reexamine the monetary mechanism, that is the mechanism through which the monetary authority by controlling certain financial variables achieves (more or less) effective control over nominal income. We propose to argue that the view of the monetary mechanism which has been widely accepted, at least until very recently, by both monetarists and Keynesians and whi...