Showing 1 - 10 of 78
We study the effects of model uncertainty in a simple New-Keynesian model using robust control techniques. Due to the simple model structure, we are able to find closed-form solutions for the robust control problem, analysing both instrument rules and targeting rules under different timing...
Persistent link: https://www.econbiz.de/10005419678
Expectations about the future are central for determination of current macroeconomic outcomes and the formulation of monetary policy. Recent literature has explored ways for supplementing the benchmark of rational expectations with explicit models of expectations formation that rely on...
Persistent link: https://www.econbiz.de/10005419689
Using New Keynesian models, we compare Friedman’s k-percent money supply rule to optimal interest rate setting, with respect to determinacy, stability under learning and optimality. We first review the recent literature. Open-loop interest rate rules are subject to indeterminacy and...
Persistent link: https://www.econbiz.de/10005423681
The emergence of the New Consensus in monetary policy has been followed by a renewal of interest in central banks’ operating procedures, and specifically in the role of open market operations. There is a general view that overnight interest rates are most effectively controlled by standing or...
Persistent link: https://www.econbiz.de/10005423684
This paper deals with the interaction of fiscal and monetary policy when the central bank is pursuing a price stability-oriented monetary policy. In particular, we study the durability of the price stability regime when public debt accumulates as a result of ultimately unsustainable deficits....
Persistent link: https://www.econbiz.de/10005423694
We investigate both the rational explosive inflation paths studied by McCallum (2001) and the classification of fiscal and monetary policies proposed by Leeper (1991) for stability under learning of rational expectations equilibria (REE). Our first result is that the fiscalist REE in the model...
Persistent link: https://www.econbiz.de/10005423711
Monetary policy transmission lags create credibility problems for the inflation-targeting policy maker who acts under discretion. We show that if prices react to monetary policy with a longer lag than output, the welfare maximizing inflationtargeting policy implies no policy stabilization of...
Persistent link: https://www.econbiz.de/10005423712
In this paper, we examine the incentives for central bank activism and caution in a two-country open-economy model with uncertainty and learning. We find that the presence of a strategic interaction between the home and foreign central banks creates an additional motivation for caution in...
Persistent link: https://www.econbiz.de/10005423715
In open economy, a choice can be made between two measures of inflation for use as a target variable: CPI inflation or domestic inflation. This paper considers flexible and strict inflation targeting strategies and explores the circumstances under which a domestic inflation target is preferred...
Persistent link: https://www.econbiz.de/10005423724
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...
Persistent link: https://www.econbiz.de/10005423727