Showing 1 - 10 of 34
We study the design of optimal monetary policy under uncertainty in a dynamic stochastic general equilibrium models. We … use a Markov jump-linear-quadratic (MJLQ) approach to study policy design, approximating the uncertainty by different … a benchmark New Keynesian model, analyzing how policy is affected by uncertainty, and how learning and active …
Persistent link: https://www.econbiz.de/10012759442
uncertainty, so-called Markov jump-linear-quadratic systems extended to include forward-looking variables. The form of model … uncertainty our framework encompasses includes: simple i.i.d. model deviations; serially correlated model deviations; estimable … regime-switching models; more complex structural uncertainty about very different models, for instance, backward- and forward …
Persistent link: https://www.econbiz.de/10013218440
The foreign exchange risk premium in an exchange rate target zone regime with devaluation/realignment risks is derived … devaluation/realignment risk, is taken into account. The risk premium is then the sum of two separate risk premia, arising from … real and nominal exchange rate premia are considered. The real and nominal risk premia from movements within the band are …
Persistent link: https://www.econbiz.de/10013222618
-market economies. The chapter discusses the history, macroeconomic effects, theory, practice, and future of inflation targeting …
Persistent link: https://www.econbiz.de/10013131986
We define and study transparency, credibility, and reputation in a model where the central bank's characteristics are unobservable to the private sector and are inferred from the policy outcome. A low-credibility bank optimally conducts a more inflationary policy than a high-credibility bank, in...
Persistent link: https://www.econbiz.de/10013137302
Inflation targeting is shown to imply inflation forecast targeting: the central bank's inflation forecast becomes an explicit intermediate target. Inflation forecast targeting simplifies both implementation and monitoring of monetary policy. The weight on output stabilization determines how...
Persistent link: https://www.econbiz.de/10013125561
A simple and transparent framework for cost-benefit analysis of \leaning against the wind" (LAW), that is, tighter monetary policy for financial-stability purposes, is presented. LAW has obvious costs in the form of a weaker economy if no crisis occurs and possible benefits in the form of a...
Persistent link: https://www.econbiz.de/10013000534
This paper specifies a new convenient algorithm to construct policy projections conditional on alternative anticipated policy-rate paths in linearized dynamic stochastic general equilibrium (DSGE) models, such as Ramses, the Riksbank's main DSGE model. Such projections with anticipated...
Persistent link: https://www.econbiz.de/10012757526
The paper argues that the reason real world fixed exchange rate regimes usually have finite bands instead of completely fixed exchange rates between realignments is that exchange rate bands, counter to the textbook result, give central banks some monetary independence, even with free...
Persistent link: https://www.econbiz.de/10012763458
We outline a method to provide advice on optimal monetary policy while taking policymakers' judgment into account. The method constructs Optimal Policy Projections (OPPs) by extracting the judgment terms that allow a model, such as the Federal Reserve Board's FRB/US model, to reproduce a...
Persistent link: https://www.econbiz.de/10013215681