Previous analyses of the implementation of inflation targeting are extended to monetary policy responses to different shocks, consequences of model uncertainty, and effects of interest rate smoothing and stabilization. Model uncertainty, output stabilization, and interest rate stabilization or...

International transmission of stochastic fiscal policy disturbances is examined in a two-country, general equilibrium framework, with possible excess supply equilibria with underutilization of resources. Nominal goods prices are sticky, although optimally set by firms in monopolistic...