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CONDI: a cost-of-nominal-distortions index

Eusepi, Stefano; Hobijn, Bart; Tambalotti, Andrea - Federal Reserve Bank of San Francisco - 2009

We construct a price index with weights on the prices of different PCE goods chosen to minimize the welfare costs of nominal distortions: a cost-of-nominal-distortions index (CONDI). We compute these weights in a multisector New Keynesian model with time-dependent price setting, calibrated using...

Persistent link: https://www.econbiz.de/10005712192

Monetary policy in a low inflation economy with learning

Williams, John C. - Federal Reserve Bank of San Francisco - 2006

at stabilizing the economy and avoiding deflation in the presence of the zero lower bound on nominal interest rates. With … imperfect knowledge of the economy and therefore continuously reestimate the forecasting model that they use to form …

Persistent link: https://www.econbiz.de/10005712223

Monetary policy mistakes and the evolution of inflation expectations

Orphanides, Athanasios; Williams, John C. - Federal Reserve Bank of San Francisco - 2010

and 1970s? We use counterfactual simulations of an estimated model of the U.S. economy to evaluate alternative monetary … stability only if the Federal Reserve had possessed excellent information regarding the structure of the economy or if it had … acted as if it placed relatively low weight on stabilizing the real economy. Neither condition held true. We document that …

Persistent link: https://www.econbiz.de/10008493870

A macro-finance model of the term structure, monetary policy, and the economy

Rudebusch, Glenn D.; Wu, Tao - Federal Reserve Bank of San Francisco - 2003

This paper develops and estimates a macro-finance model that combines a canonical affine no-arbitrage finance specification of the term structure with standard macroeconomic aggregate relationships for output and inflation. From this new empirical formulation, we obtain several important...

Persistent link: https://www.econbiz.de/10010702130

Inflation scares and forecast-based monetary policy

Orphanides, Athanasios; Williams, John C. - Federal Reserve Bank of San Francisco - 2003

expectations in the economy and in the conduct of monetary policy. Agents are assumed to have imperfect knowledge of the precise … structure of the economy and the policymakers' preferences. Expectations are governed by a perpetual learning technology. With …

Persistent link: https://www.econbiz.de/10010702134

Imperfect knowledge, inflation expectations, and monetary policy

Orphanides, Athanasios; Williams, John C. - Federal Reserve Bank of San Francisco - 2002

This paper investigates the role that imperfect knowledge about the structure of the economy plays in the formation of … learning technology to form expectations and continuously update their beliefs regarding the dynamic structure of the economy …

Persistent link: https://www.econbiz.de/10010702135

How important is precommitment for monetary policy?

Dennis, Richard; Soderstrom, Ulf - Federal Reserve Bank of San Francisco - 2002

Economic outcomes in dynamic economies with forward-looking agents depend crucially on whether or not the central bank can precommit, even in the absence of the traditional "inflation bias." This paper quantifies the welfare differential between precommitment and discretionary policy in both a...

Persistent link: https://www.econbiz.de/10010702151

Assessing nominal income rules for monetary policy with model and data uncertainty

Rudebusch, Glenn D. - Federal Reserve Bank of San Francisco - 2000

Nominal income rules for monetary policy have long been debated, but two issues are of particular recent interest. First, there are questions about the performance of such rules over a range of plausible empirical models-especially models with and without rational inflation expectations. Second,...

Persistent link: https://www.econbiz.de/10010702167

Robust monetary policy with competing reference models

Levin, Andrew T.; Williams, John C. - Federal Reserve Bank of San Francisco - 2003

reference model while the true economy lies within a specified neighborhood of the reference model. In this paper, we show that … economy. We find that a robust outcome is attainable only in cases where the objective function places substantial weight on … tolerance of each model economy with respect to deviations from optimal policy. …

Persistent link: https://www.econbiz.de/10010702172

Inferring policy objectives from economic outcomes

Dennis, Richard - Federal Reserve Bank of San Francisco - 2003

economy's evolution over time. The paper derives conditions under which the parameters in a policymaker's policy objective …-price model of the US economy, estimating jointly all of the model's behavioral parameters and the policy regime parameters. The …

Persistent link: https://www.econbiz.de/10010702194