Using the Bank of Canada's main projection and policy-analysis model, ToTEM, this paper measures the welfare gains of switching from inflation targeting to price-level targeting under imperfect credibility. Following the policy change, private agents assign a probability to the event that the...

This paper studies the cost of limited commitment when a central bank has the discretion to adjust policy whenever the costs of honoring its past commitments become high. Specifically, we consider a central bank that seeks to implement optimal policy in a New Keynesian model by committing to a...

There appears to be a disconnect between the importance of the zero bound on nominal interest rates in the real-world and predictions from quantitative DSGE models. Recent economic events have reinforced the relevance of the zero bound for monetary policy whereas quantitative models suggest that...

Various papers have suggested that Price-Level targeting is a welfare improving policy relative to Inflation targeting. From a practical standpoint, this raises an important yet unanswered question: What is the optimal price index to target? This paper derives the optimal price level targeting...

A view advanced in the aftermath of the late-2000s financial crisis is that lower than optimal interest rates lead to excessive risk taking by financial intermediaries. We evaluate this view in a quantitative dynamic model where interest rate policy affects risk taking by changing the amount of...

A view advanced in the aftermath of the late-2000s financial crisis is that lower than optimal interest rates lead to excessive risk taking by financial intermediaries. We evaluate this view in a quantitative dynamic model in which interest rate policy affects risk taking by changing the amount...