For a country that chooses not to "permanently" fix its exchange rate through a currency board, or a common currency, or some kind of dollarization, the only alternative monetary policy that can work well in the long run is one based on the trinity of (i) a flexible exchange rate, (ii) an inflation target, and (iii) a monetary policy rule.' While not often put into this threepart format, the de...

The Federal Reserve system (the Fed) is the United States monetary policy authority and is mandated by Congress to pursue two goals: 1) maximum sustainable output and employment and 2) stable prices. Among the actions the Fed can take to achieve these goals is the ability to set the target federal funds rate. Simple policy rules that set the level of funds rate in response to changes in economi...

Monetary policy is conducted in an environment of considerable uncertainty. In particular, Bernanke (2007) emphasizes that monetary authority faces substantial challenges in determining the sources of variation in macroeconomic variables. What can policy-makers do when supply and demand disturbances are unobserved and indistinguishable? Is a policy rule widely conducted otherwise still appropri...

The auesllon of whether monetary pollcy should be conducled by mles known In advance lo all w by potlcymaker dlscrerm IS an endurlng debate This Daoer traces the evolul~on of rule advocacy from the time of the Federal Reserve Act and examlnes the problems asscc~ated w ~ l h mak~ng a rule operat~onal The author cmcludes that some degree of dlscrellon may be necessary and lhal 11 IS uselul to ana...

We show in a simple monetary model that the learning dynamics do not converge to rational expectations steady state. then it is necessary restrict rule obtain convergence.

The deferred acceptance algorithm is often used to allocate indivisible objects when monetary transfers are not allowed. We provide two characterizations of agent-proposing deferred acceptance allocation rules. Two new axioms, individually rational monotonicity and weak Maskin monotonicity, are essential to our analysis. An allocation rule is the agent-proposing deferred acceptance rule for som...