The natural rate of interest -- the real interest rate consistent with output equaling potential -- plays an important role in both economic forecasting and monetary policy. Much of the literature has assumed that the natural rate of interest is constant. For example, the Taylor rule includes a...

This paper studies the formulation of monetary policy in a changing environment when knowledge regarding some aspects of the structure of the economy is imperfect and an adaptive learning technology is available to the policymaker and economic agents. As a benchmark, we develop a simple model of...

This paper examines welfare-maximizing monetary policy in an estimated micro-founded general equilibrium model of the U.S. economy where the policymaker faces uncertainty about model parameters. Uncertainty about parameters describing preferences and technology implies not only uncertainty about...

We examine the performance and robustness properties of monetary policy rules in an estimated macroeconomic model in which the economy undergoes structural change and where private agents and the central bank possess imperfect knowledge about the true structure of the economy. Policymakers...

A central tenet of inflation targeting is that establishing and maintaining well-anchored inflation expectations are essential. In this paper, we reexamine the role of key elements of the inflation targeting framework towards this end, in the context of an economy where economic agents have an...

The macroeconomic costs of disinflation are considered for the United States in a rational expectations macroeconometric model with sticky prices and imperfect information regarding monetary policy objectives. The analysis centers on simulation experiments using the Board’s new quarterly...