The link between monetary policy and asset price movements has been of perennial interest to policy makers. In this Paper we consider the potential case for pre-emptive monetary restrictions when asset price reversals can have serious effects on real output. First, we provide some historical...

This Paper provides a discussion of some aspects of aggregate supply and demand determination in the United Kingdom. It argues that: (1) UK policymakers in the 1960s and 1970s did not use the downward-sloping Phillips curve as a model of inflation or a guide to policy. The explanation proposed...

The inertia found in econometric estimates of interest rate rules is a continuing puzzle. Many reasons for it have been offered, though unsatisfactorily, and the issue remains open. In the empirical literature on interest rate rules, inertia in setting interest rates is typically modelled by...

Understanding the degree of measurement error in the estimates of the output gap available to policymakers in ‘real time’ is important both for the formulation of monetary policy and for the study of inflation behaviour. For the United Kingdom, no official output gap series was published for...

New-Keynesian models are characterized by the presence of expectations as explanatory variables. To use these models for policy evaluation, the econometrician must estimate the parameters of expectation terms. Standard estimation methods have several drawbacks, including possible lack of...

The New-Keynesian Taylor-Rule model of inflation determination with no role for money is incomplete. As Cochrane (2007a, b) argues, it has no credible mechanism for ruling out bubbles (or deal with the non-uniqueness problem that arises when the Taylor principle is violated) and as a result...

In January 2000 the Swiss National Bank adopted a new monetary policy framework incorporating a price stability objective defined as (any rate of) CPI inflation below 2 percent. We contrast this framework with inflation targeting strategies and review the SNB’s policy decisions since its...

I consider some of the leading arguments for assigning an important role to tracking the growth of monetary aggregates when making decisions about monetary policy. First, I consider whether ignoring money means returning to the conceptual framework that allowed the high inflation of the 1970s....

In a simple macromodel with forward-looking expectations, this Paper looks into disclosure policy when a central bank has private information on future shocks. The main result is that advance disclosure of forecasts of future shocks does not improve welfare, and in some cases is not desirable as...

The paper discusses several issues related to how monetary policy should be conducted in an era of price stability. Low inflation (with base drift in the price level) and price-level stability (without such base drift) are compared, and a suitable loss function (corresponding to flexible...