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...

What is the impact of changing central bank independence (CBI) on the inflation-output trade-off? This paper introduces the notion of effective CBI and distinguishes its political from its economic effects on the trade-off by analyzing the interaction between the government, the median voter and...

A popular strategy for estimating output gaps is to anchor them to structural economic relationships. The resulting output gaps, however, are often highly sensitive to numerous auxiliary assumptions inherent in the approach. This complicates their use in policymaking. We illustrate the point...