This work describes the main characteristics of an inflation targeting regime and derives the optimal solution for interest rates according to an original methodology for two models based on the Phillips and IS curves containing general exogenous variables and a complete loss-function

We present a model in which the central bank, the current government and the median voter interact strategically and repeatedly. If the central bank is completely independent, it can implement an equilibrium in which the monetary policy is tight and beneficial in the long run. However, if the...