Inflation inertia and optimal delegation of monetary policy

This paper analyzes the relationship between the optimal weight on output gap in the central bank's loss function and the degree of inertia in a hybrid version of New Keynesian model with a pure discretionary inflation targeting. I show that under endogenous persistence of inflation dynamics, even in discretionary monetary policy regime, a Rogoff's (1985) conservative central banker does not necessarily improve social welfare.

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Year of publication:	2011
Authors:	Morimoto, Keiichi
Published in:	Economics Bulletin. - AccessEcon, ISSN 1545-2921. - Vol. 31.2011, 2, p. 1114-1124
Publisher:	AccessEcon
Subject:	hybrid New Keynesian model \| inflation targeting \| policy weight

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Extent:	application/pdf
Type of publication:	Article
Language:	English
Classification:	E5 - Monetary Policy, Central Banking and the Supply of Money and Credit
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10009643081