In models with complete markets, targeting core inflation enables monetary policy to maximize welfare by replicating … stabilize price movements in the flexible price sector. Also, in the presence of financial frictions, stabilizing core inflation … frictions a welfare-maximizing central bank should adopt flexible headline inflation targeting--a target based on headline …

solutions such as the conservative central banker and optimal inflation contracts. Our theoretical model also shows how an … inflation targeting range should be set and how it should respond to changes in the nature of shocks to the economy …

perform poorly when knowledge is imperfect. In particular, policies that fail to maintain tight control over inflation are … prone to episodes in which the public's expectations of inflation become uncoupled from the policy objective and stagflation … effective communication of a central bank's inflation objective and of continued vigilance against inflation in anchoring …

inflation targeting affected households’ expectations. Starting with the day of the announcement, there is a very small uptick … different. When we provide randomly selected households with pertinent information about average inflation targeting, their … expectations still do not change in a different way than when households are provided with information about traditional inflation …

Reserve and commercial inflation forecasts. We demonstrate that the Federal Reserve has considerable information about … inflation beyond what is known to commercial forecasters. We also provide evidence that monetary policy actions provide signals …

We study how different forms of communication influence the inflation expectations of individuals in a randomized … controlled trial. We first solicit individuals' inflation expectations in the Nielsen Homescan panel and then provide eight … different forms of information regarding inflation. Reading the actual Federal Open Market Committee (FOMC) statement has about …

We develop and estimate a general equilibrium model in which monetary policy can deviate from active inflation …

inflation targeting and aggressive use of forward guidance. In contrast to the predictions of conventional macroeconomic theory … inflation, which is consistent with the evidence. As Kuroda (2016) emphasizes, for an economy without a history of inflation … being anchored by a target, individuals need direct evidence that the central bank is capable of moving inflation to target …

In closed or open economy models with complete markets, targeting core inflation enables monetary policy to maximize … is high. We develop an open economy model with incomplete financial markets to show that headline inflation targeting … headline inflation, assigns zero weight to import prices …