That governments should delegate the operation of monetary policy to independent central banks is widely advocated. For a closed economy, the optimal choice results in a banker who is more conservative than the representative government, assigning a lower weight on output in her welfare...

This paper examines what economics can say about a regime shift from the exchange rate mechanism to European monetary union. The primary issues concern the credibility of monetary and fiscal policy; the institutional structures that best underpin that credibility; and how agents will learn to...

This paper presents an analysis of the long-run implications of short-term stabilization policy. The analysis is based on a simple, stochastic model of an imperfectly competitive economy with nominal rigidities and an endogenous technology. By virtue of the latter, temporary shocks have...