This paper shows that monetary policy should be delegated to a central bank that cross-checks optimal policy with information from the Taylor rule. Attaching some weight to deviations of the interest rate from the interest rate prescribed by the Taylor rule is beneficial if the central bank aims at optimally stabilizing inflation and output gap variability under discretion. Placing a weight on ...

This paper examines monetary and fiscal policy through the estimation of a New-Keynesian dynamic general equilibrium model for Iran’s economy. In this New-Keynesian dynamic general equilibrium model, the consumers encounter the liquidity constraint and the firms face sticky prices, while they are changing them. In the model presented, a role is considered for both government spending and taxati...

This paper provides an overview of economic developments and the conduct of monetary policy in interwar Japan, while considering the relationships of these fluctuations and policies to changes in the monetary regime. To this end, monetary policies under the respective monetary regimes are discussed by using the Taylor Rule, which has recently been widely applied to evaluations of monetary polic...

The central bank’s monetary policy targets are usually assumed to be constant overtime for simplicity when estimating a Taylor rule, but recent studies have shed some light on the time variation in policy targets, especially in the inflation target. The potential bias due to misspecification of the time variation can be quite considerable, especially in regime-swtiching models. In this paper, w...

I develop an extension of the standard New Keynesian model to monetary policy regime switching to study the impact of uncertainty around the future inflation target. First, I fully characterize how the responses of current inflation and output to inflation target uncertainty depend on the monetary policy rule. If monetary policy is passive, inflation may increase far beyond the anticipated incr...

I develop an extension of the standard New Keynesian model to monetary policy regime switching to study the impact of uncertainty around the future inflation target. First, I fully characterize how the responses of current inflation and output to inflation target uncertainty depend on the monetary policy rule. If monetary policy is passive, inflation may increase far beyond the anticipated incr...

In this paper, I consider the lessons recent academic research and historical experiences with monetary targeting and inflation targeting offer for the design of monetary policy regimes. The practical experiences with both monetary and inflation targeting suggest that successful policies have incorporated a great deal of flexibility. In principle, both monetary targeting and inflation targeting...

Beginning with the Reserve Bank of New Zealand Act of 1989, central banking reforms have focused on assigning clear goals for which monetary policy authorities can be held accountable. Inflation targeting regimes provide examples of such goal-based policy frameworks. An alternative approach, recently argued for by John Taylor (2012, 2014), relies on a rule-based framework in which the policy au...

I develop an extension of the standard New Keynesian model to monetary policy regime switching to study the impact of uncertainty around the future inflation target. First, I fully characterize how the responses of current inflation and output to inflation target uncertainty depend on the monetary policy rule. If monetary policy is passive, inflation may increase far beyond the anticipated incr...

The authors assess the stabilization properties of simple monetary policy rules within the context of a small open-economy model constructed around the limited-participation assumption and calibrated to salient features of the Canadian economy. By relying on limited participation as the main nominal friction that affects the artificial economy, the authors provide an important check of the robu...