The 'new open-economy macroeconomics' seeks to provide an improved basis for monetary and exchange-rate policy through the construction of open-economy models that feature rational expectations, optimising agents, and slowly adjusting prices of goods. This paper promotes an alternative approach...

This paper updates and extends Friedman's (1972) evidence on the lag between monetary policy actions and the response of inflation. Our evidence is based on UK and US data for the period 1953 2001 on money growth rates, inflation, and interest rates, as well as annual data on money growth and...

The United Kingdom is a highly open economy, and has a monetary policy strategy of targeting inflation in consumer prices. In this paper, we look at the evidence from the UK on inflation behaviour, and examine the propositions from several theoretical models about inflation dynamics in an open...

In this paper we investigate the problem of selecting an optimal horizon for inflation targeting in the United Kingdom. Since there are two key ways of thinking about an optimal horizon, we look at optimal horizons for both of these interpretations. In addition, to see whether our results are...

It is clear that at present various versions of the Calvo (1983) model of price adjustment are dominant in monetary policy analysis'see, e.g., Woodford (2003). This is true despite well-known criticisms including Mankiw (2001) or Mankiw and Reis (2002) and the well-documented need for the...

To be useful as a guide to behavior, a model that includes a relationship between x_t and z_t+1 must specify whether x_t is influenced by the expectation at t of z_t+1 or, that z_t+1 is inertially influenced by x_t. We show that, for a broad class of linear RE models, distinct causal...