Inflation magnifies the distorting effects of taxation when the tax treatment of interest income and expense is not fully indexed to inflation. The distortion involves a real interest tax wedge which is the difference between the real before tax interest rate that influences fully taxed...

Scientific inquiry embodies skepticism. Researchers are trained to scrutinize every result, doubting not only the truth but also the tests of every hypothesis. Research papers in professional journals typically present only summaries of results, however, providing neither the programs nor data...

In this paper, we evaluate the accuracy of the U.S. Treasury Department forecasts of real growth and inflation from 1976 to 1990 for the Group of Seven (G-7) economies. The accuracy of these forecasts is measured against the standard of actual real world growth and inflation as subsequently...

This paper reviews the inflation experience in the post-Bretton Woods era in the context of alternative central bankobjectives. It summarizes research on inflation-targeting issues, especially those associated with stabilizing the price level. Generally, inflation-targeting schemes do not...

This paper shows that the optimal monetary policies recommended by New Keynesian models still imply a large amount of inflation risk. We calculate the term structure of inflation uncertainty in New Keynesian models when the monetary authority adopts the optimal policy. When the monetary policy...

Empirical work in macroeconomics is plagued by small sample size and large idiosyncratic variation. This problem is especially severe in the case of transition economies. We use a mixed estimation method incorporating information from OECD country data to estimate the parameters of a...

In this paper, we examine the areas of indeterminacy in a flexible price RBC model with shopping time role for money and a central bank that uses an interest rate rule to target inflation and/or the price level. We present analytical results showing that, although inflation targeting often...

This paper summarizes recent developments in the theory and practice of monetary policy in a closed economy and explains what these developments mean for United States dollar policy. There is no conflict between what is appropriate U.S. monetary policy at home or abroad because the dollar is the...