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May/June 1996, 
Vol. 78, No. 3
Posted 1996-05-01

Inflation Targeting in a St. Louis Model of the 21st Century

by Robert G. King and Alexander L. Wolman

The authors construct a small-scale modern macroeconomic model to study the effects of alternative monetary and fiscal policies in a manner consistent with Lucas’ recommendations. That is, they build a rational expectations macroeconomic model in which the intertemporal optimization problems of households and firms are explicitly described. They call this a St. Louis model of the 21st century because they believe it is the type of small-scale macroeconomic model that will be systematically employed for the purpose of policy analysis by central banks in the coming years.