This paper applies a new measure of the effectiveness of sterilized interventions to data for 16 economies. The measure is defined as the difference between ex ante(xaEMP) and ex post exchange market pressure(xpEMP). xaEMP is calculated on the basis of a counterfactual that no intervention takes...

In this article, we introduce an index of ex ante exchange market pressure (EMP) that can be used as a benchmark against which to measure the effectiveness of sterilized intervention. Ex ante EMP is the change in the exchange rate that would have been observed if the policy authority had...

The problem of monetary policy delegation is formulated as a two-stage non-cooperative game between the government and the central bank. The solution to this policy game determines the optimal combination of central bank conservatism and independence. The results show that the optimal...

This article studies the impact of alternative institutional configurations on economic performance when there is strategic interaction between the government and the central bank. The interaction between the fiscal and monetary authorities is modeled as a non-cooperative two-stage game. The...

This study provides a detailed quantitative analysis of a transition to inflation targeting with a focus on the role of expectations. We investigate the impact of the Turkish central bank’s inflation reduction programs on inflation in Turkey from 1996 to 2005. Over this period there was a...

In this article, benchmark Taylor rules are obtained as the solution to a dynamic programming problem in which interest rates are chosen to minimize the discounted sum of observed inflation and output variations. The properties of these benchmark rules are used to derive efficiency conditions...

The degree to which explicit inflation targets contribute to the success of price stabilization policies has not been conclusively established. To assess the impact of announced inflation targets on the effectiveness of monetary policy, we construct indicators of inflation pressure that allow us...

This article investigates the impact on economic performance of the timing of moves in a policy game between the government and the central bank for a government with both distributional and stabilization objectives. It is shown that both inflation and income inequality are reduced without...

The problem of monetary policy delegation is formulated as a two-stage game between the government and the central bank. In the first stage the government chooses the institutional design of the central bank. Monetary and fiscal policy are implemented in the second stage. When fiscal policy is...

Uncertainties associated with the informational content of real-time data and the impact of policy initiatives on expectations have been offered as rationales for gradualism in monetary policy. Our objective is to assess these potential explanations quantitatively. Focusing on inflation as the...