Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/144215 
Year of Publication: 
2000
Series/Report no.: 
NBB Working Paper No. 1
Publisher: 
National Bank of Belgium, Brussels
Abstract: 
In this paper, the interaction between inflation and monetary policy rules is analysed within the framework of a dynamic general equilibrium model derived from optimising behaviour and rational expectations. Using model simulations, it is illustrated that the control of monetary policy over the inflation process is strongly dependent on the role of forward looking expectations in the price and wage setting process and on the credibility of monetary policy in the expectation formation process of the private sector. Furthermore, the central bank should take into account a wide variety of indicators in making monetary policy decisions in order to approach the optimal monetary policy rule as closely as possible.
Document Type: 
Working Paper

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