In noise we trust? Optimal monetary policy with random targets

We show that a monetary policy in which the central bank commits to a randomized inflation target allows for potentially faster-expectations convergence than with a fixed target. The randomized target achieves faster convergence in particular in transition environments: those demonstrating either particularly high or low inflation.

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Year of publication:	2006
Authors:	Cohen-Cole, Ethan ; Cosmaciuc, Bogdan
Publisher:	Boston, MA : Federal Reserve Bank of Boston
Subject:	Monetary policy \| asymmetric information \| Bayesian rational expectations \| commitment

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Series:	Working Papers ; 06-14
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	568811836 [GVK] hdl:10419/55578 [Handle]
Classification:	E52 - Monetary Policy (Targets, Instruments, and Effects) ; E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination ; E42 - Monetary Systems; Standards; Regimes; Government and the Monetary System
Source:	EconStor

Persistent link: https://www.econbiz.de/10010280889