Under a conventional policy rule, a central bank adjusts its policy rate linearly according to the gap between inflation and its target, and the gap between output and its potential. Under the opportunistic approach to disinflation a central bank controls inflation aggressively when inflation is...

We develop a general mandate framework for delegating monetary policy to an instrument-independent, but goal-dependent central bank. The goal of the mandate consists of: (i) a simple quadratic a loss function that penalizes deviations from target macroeconomic variables; (ii) a form of a...

We investigate the relative roles of monetary policy and shocks in causing the Great Moderation, using indirect inference where a DSGE model is tested for its ability to mimic a VAR describing the data. A New Keynesian model with a Taylor Rule and one with the Optimal Timeless Rule are both...

Post great financial crisis (GFC) of 2008-2009, there has been a surge in the macroeconomics literature on aggregate uncertainty. Although the recent literature has recognized adverse real effects of global uncertainty shocks in EMEs, the role of monetary policy in mitigating these effects is...

Simple models of monetary policy often imply optimal policy behavior that is considerably more aggressive than what is commonly observed. This paper argues that such counterfactual implications are due to model restrictions and a failure to account for multiplicative parameter uncertainty,...

The effects of different institutional arrangements for the central bank are examined in the presence of economic shocks and uncertainty about the central banker's and the medianvoter's inflation target. A contract which is based on self-imposed monetary target announcements proves to be...

Recent empirical evidence by Fair (2002,2005) and Giordani (2003) shows that a positive inflation shock with the nominal interest rate held constant has contractionary effects. These results cannot be reconciled with the standard 'New Synthesis' literature. This paper reconsiders the effects of...

This paper makes changes in monetary policy rules (or regimes) endogenous. Changes are triggered when certain endogenous variables cross specified thresholds. Rational expectations equilibria are examined in three models of threshold switching to illustrate that (i) expectations formation...

This paper makes changes in monetary policy rules (or regimes) endogenous. Changes are triggered when certain endogenous variables cross specified thresholds. Rational expectations equilibria are examined in three models of threshold switching to illustrate that (i) expectations formation...