In the last few years papers have begun to analyse optimal monetary and fiscal policy in models incorporating nominal rigidities where social welfare is derived from the utility of agents. This article examines whether this analysis provides support for the consensus assignment, where monetary...

In this article we consider two arguments suggesting that monetary authorities in an open economy should target output price inflation and not consumer price inflation. The first suggests that output price inflation corresponds to the distortions caused by price rigidity. The second shows how...

Ball (1999) uses a small closed economy model to show that nominal GDP targeting can lead to instability. This paper extends Ball's model to uncover the role inflation expectations play in generating this instability. Allowing inflation expectations to be formed by the more general mixed...