In this article, benchmark Taylor rules are obtained as the solution to a dynamic programming problem in which interest rates are chosen to minimize the discounted sum of observed inflation and output variations. The properties of these benchmark rules are used to derive efficiency conditions...

In this article, the optimal interest rate rule generated by Svennson's (1997) dynamic model is used to determine the impact that a number of key structural characteristics have on the downward flexibility of interest rates at low rates of inflation. The potential impact of preferences for...