Simple Monetary Policy Rules Under Model Uncertainty
Title | Simple Monetary Policy Rules Under Model Uncertainty PDF eBook |
Author | Ann-Charlotte Eliasson |
Publisher | International Monetary Fund |
Pages | 61 |
Release | 1999-05-01 |
Genre | Business & Economics |
ISBN | 1451849710 |
Using stochastic simulations and stability analysis, the paper compares how different monetary rules perform in a moderately nonlinear model with a time-varying nonaccelerating-inflation-rate-of-unemployment (NAIRU). Rules that perform well in linear models but implicitly embody backward-looking measures of real interest rates (such as conventional Taylor rules) or substantial interest rate smoothing perform very poorly in models with moderate nonlinearities, particularly when policymakers tend to make serially correlated errors in estimating the NAIRU. This challenges the practice of evaluating rules within linear models, in which the consequences of responding myopically to significant overheating are extremely unrealistic.
Monetary Policy Rules
Title | Monetary Policy Rules PDF eBook |
Author | John B. Taylor |
Publisher | University of Chicago Press |
Pages | 460 |
Release | 2007-12-01 |
Genre | Business & Economics |
ISBN | 0226791262 |
This timely volume presents the latest thinking on the monetary policy rules and seeks to determine just what types of rules and policy guidelines function best. A unique cooperative research effort that allowed contributors to evaluate different policy rules using their own specific approaches, this collection presents their striking findings on the potential response of interest rates to an array of variables, including alterations in the rates of inflation, unemployment, and exchange. Monetary Policy Rules illustrates that simple policy rules are more robust and more efficient than complex rules with multiple variables. A state-of-the-art appraisal of the fundamental issues facing the Federal Reserve Board and other central banks, Monetary Policy Rules is essential reading for economic analysts and policymakers alike.
The Performance of Forecast-based Monetary Policy Rules Under Model Uncertainty
Title | The Performance of Forecast-based Monetary Policy Rules Under Model Uncertainty PDF eBook |
Author | Andrew T. Levin |
Publisher | |
Pages | 60 |
Release | 2001 |
Genre | Inflation (Finance) |
ISBN |
Real-time Model Uncertainty in the United States
Title | Real-time Model Uncertainty in the United States PDF eBook |
Author | Robert J. Tetlow |
Publisher | |
Pages | 47 |
Release | 2010 |
Genre | |
ISBN |
Simple Rules for Monetary Policy
Title | Simple Rules for Monetary Policy PDF eBook |
Author | John Carroll Williams |
Publisher | |
Pages | 46 |
Release | 1999 |
Genre | Monetary policy |
ISBN |
Designing a Simple Loss Function for Central Banks
Title | Designing a Simple Loss Function for Central Banks PDF eBook |
Author | Davide Debortoli |
Publisher | International Monetary Fund |
Pages | 56 |
Release | 2017-07-21 |
Genre | Business & Economics |
ISBN | 1484311752 |
Yes, it makes a lot of sense. This paper studies how to design simple loss functions for central banks, as parsimonious approximations to social welfare. We show, both analytically and quantitatively, that simple loss functions should feature a high weight on measures of economic activity, sometimes even larger than the weight on inflation. Two main factors drive our result. First, stabilizing economic activity also stabilizes other welfare relevant variables. Second, the estimated model features mitigated inflation distortions due to a low elasticity of substitution between monopolistic goods and a low interest rate sensitivity of demand. The result holds up in the presence of measurement errors, with large shocks that generate a trade-off between stabilizing inflation and resource utilization, and also when ensuring a low probability of hitting the zero lower bound on interest rates.
Optimal Monetary Policy under Uncertainty, Second Edition
Title | Optimal Monetary Policy under Uncertainty, Second Edition PDF eBook |
Author | Richard T. Froyen |
Publisher | Edward Elgar Publishing |
Pages | 466 |
Release | 2019 |
Genre | Mathematical optimization |
ISBN | 1784717193 |
This book provides a thorough survey of the model-based literature on optimal monetary in a stochastic setting. The survey begins with the literature of the 1970s which focused on the information problem in policy design and extends to the New Keynesian approach of the 1990s which centered on evaluating alternative targeting strategies. New to the second edition is consideration of research since the world financial crisis on the role of financial markets and institutions in the conduct of monetary policy.