Is systematic monetary policy a driver of the forward premium puzzle, i.e. the tendency of high interest-rate currencies to appreciate, thus strongly violating Uncovered Interest Parity (UIP)? We address this question by studying a battery of monetary policy rules in a small open economy that is...

Recent theoretical and empirical work has cast doubt on the hypotheses of a linear Phillips curve and a symmetric quadratic loss function underlying traditional thinking on monetary policy. This paper analyzes the Barro-Gordon optimal monetary policy problem under alternative loss...