Damjanovic, Tatiana; Damjanovic, Vladislav; Nolan, Charles - Centre for Dynamic Macroeconomic Analysis, University … - 2006
We discuss the issue of time consistency of monetary policy. We develop a simple and intuitive procedure to derive analytically the unconditionally optimal (UO) policy in a general linear-quadratic set-up, a perspective stressed by Taylor (1979) and Whiteman (1986). We compare the UO perspective...