A simple test of inflation target credibility is constructed by subtracting the maximum and minimum inflation rates consistent with the inflation targets from the yields to maturity on nominal bonds. This results in a target-consistent range of real yields on nominal bonds. If expected real...

The paper gives a brief account of the Swedish experience of an inflation target in a floating exchange rate regime; identifies, documents and discusses the current problems in Swedish monetary policy and their origins; suggests what can be done to remedy the problems; and draws some general...

The paper argues that real world fixed exchange rate regimes usually have finite bands instead of completely fixed exchange rates between realignments because exchange rate bands, contrary to the textbook result, give central banks some monetary independence even with free international capital...

Inflation target regimes (like those of Canada, Finland, New Zealand, Sweden and the United Kingdom) are interpreted as having explicit inflation targets and implicit output/unemployment targets. Without output/unemployment persistence, delegation of monetary policy to a discretionary...

This paper analyses information from survey data collected in the framework of the Eurosystem’s Wage Dynamics Network (WDN) on patterns of firm-level adjustment to shocks. We document that the relative intensity and the character of price vs. cost and wage vs. employment adjustments in...

This paper develops a welfare-based model of monetary policy in an open economy. We focus on the extent to which monetary policy should be employed in maintaining the exchange rate. The traditional approach maintains that exchange rate flexibility is desirable in the presence of real...

This paper studies monetary policy games in a two-period Mundell-Fleming model, under a regime of managed exchange rates. A regime of managed exchange rates is defined as one where exchange rates are pegged but bilateral parities can be changed from time to time. The paper argues that such a...

This paper considers the effects of monetary and fiscal policies in an optimizing model with capital accumulation and finite lives. An increase in monetary growth is no longer superneutral in a money-capital economy, but leads to a reduction in the real interest rate and increases in the capital...

This paper analyses the costs and benefits of European monetary unification. The benefits take the form of the reduction in exchange risk, equalization of interest rates, decline in relative price variability and general increase in economic efficiency likely to accompany unification. The costs...

This paper analyses and compares the effects of common demand and supply shocks on the setting of optimal monetary policies under a clean float, a managed exchange rate system (such as the EMS) and a monetary union, when welfare depends on unemployment and the cost of living. The results suggest...