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 …

Modern theory has delivered both the conservative central banker and the principal-agent approaches as rationales for … shows not only that greater independence is associated with lower inflation, but also that the central bank's rights not to … finance the government and to set interest rates independently increase its effectiveness. The role of inflation targeting and …

inflation target. The first two strategies restore the Taylor principle as a sufficient condition for stabilizing expectations …. In contrast, in economies with persistent shocks, communicating the inflation target fails to protect against … policy strategy: announcing an inflation target is not enough to stabilize expectations -- one must also announce how this …

focusing inflation targeting that is implemented by a Taylor type rule, a rule that in equilibrium is reflected in the exchange … monetary can't deliver a stationary domestic price level. Another feature in the data for inflation targeting countries that is … direction from PPP in response to an 'inflation' shock - the 'bad news god news' result of Clarida -Waldman (2008;2014). This is …

central banks to control inflation within their borders, at least in the absence of coordination of policy with other central … the ability of monetary policy to control inflation: by making liquidity premia a function of quot;global liquidityquot … central banks to control the dynamics of inflation …

Should central banks, because of the zero-lower-bound problem, raise their inflation-rate targets? Several arguments … are relevant. (1) In the absence of the ZLB, the optimal steady-state inflation rate, according to standard New Keynesian … currency is feasible (even arguably attractive) and would remove the ZLB constraint on policy. (5) Increasing target inflation …

This paper assumes that a central bank commits itself to maintaining an inflation target and then asks what measure of … the inflation rate the central bank should use if it wants to maximize economic stability. The paper first formalizes this …

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 …

Inflation targeting is shown to imply inflation forecast targeting: the central bank's inflation forecast becomes an … explicit intermediate target. Inflation forecast targeting simplifies both implementation and monitoring of monetary policy …. The weight on output stabilization determines how quickly the inflation forecast is adjusted towards the inflation target …

Observed inflation targets around the industrial world are concentrated at two percent per year. This chapter … investigates the extent to which the observed magnitudes of inflation targets are consistent with the optimal rate of inflation … inflation ranges from minus the real rate of interest to numbers insignificantly above zero. Furthermore, we argue that the zero …