We use Bayesian methods to estimate the preferences of the US Federal Reserve by assuming that monetary policy is performed optimally under commitment since the mid-sixties. For this purpose, we distinguish between three subperiods, i.e. the pre-Volcker, the Volcker-Greenspan and the Greenspan...

We analyze the influence of the Taylor rule on US monetary policy by estimating the policy preferences of the Fed within a DSGE framework. The policy preferences are represented by a standard loss function, extended with a term that represents the degree of reluctance to letting the interest...

We employ information-gap decision theory to derive a robust monetary policy response to Knightian parameter uncertainty. This approach provides a quantitative answer to the question: For a specified policy, how much can our models and data err or vary, without rendering the outcome of that...

We estimate the interdependence between US monetary policy and the S&P 500 using structural VAR methodology. A solution is proposed to the simultaneity problem of identifying monetary and stock price shocks by using a combination of short-run and long-run restrictions that maintains the...

A hybrid inflation/price-level target combines elements of both inflation and price-level targets. The paper derives a hybrid target within a new Keynesian model with inflation persistence due to price indexation. The result generalizes a result by Vestin (2005) that the optimal policy could be...

We argue that the correct identification of monetary policy shocks in a vector autoregression requires that the identification scheme distinguishes between permanent and transitorymonetary policy shocks. The permanent shocks reflect changes in the inflation target while the transitory shocks...

With sticky prices, optimizing agents and money in the utility function, I derive the exact analytical solution for optimal monetary policy given a zero lower bound (ZLB) on the interest rate. The Phillips curve is Neo-Classical, and the ZLB is then not a constraint on optimal policy. Optimal...

This essay examines Norwegian monetary policy under the final decades of the classical international gold standard regime prior to World War I. While the evidence clearly demonstrates that the commitment to gold convertibility was the overall objective, the character of monetary policy was...

Svensson (2004) suggested that a monetary policy committee of a central bank (MPC) should “find an instrument-rate path such that projections of inflation and output gap ‘look good’.” Academic literature on monetary policy gives guidance as to what the words “look good” means....

This paper analyzes how monetary policy responds to exchange rate movements in open economies, paying particular attention to the two-way interaction between monetary policy and exchange rate movements. We address this issue using a structural VAR model that is identified using a combination of...