Managing Beliefs about Monetary Policy underDiscretion

Monetary policy is most effective when public beliefs about future policies are activelymanaged. This is the appeal of policy rules and commitment strategies, typically absent underdiscretion. But when a policymaker has some private information — as is the case in reality— belief management becomes an integral part of optimal discretion policies, too.[...]

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Year of publication:	2009-04-01
Authors:	Mertens, Elmar
Institutions:	National Centre of Competence in ResearchFinancial Valuation and Risk Management
Subject:	Eingeschränkte Rationalität \| Geldpolitik \| Kalman-Filter \| Markov-Entscheidungsprozess \| Markov

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1 Introduction
2 A Simple Model of Hidden Information
2.1 New Keynesian Economy
2.2 Hidden Information
2.3 The Discretionary Policy Problem
2.4 Optimal Policy in the Simple Model
3 Belief Shocks
4 (In-)Credible Disinflations and Exogenous Persistence
5 Related Literature
6 Conclusions
Appendix
Reference

Persistent link: https://www.econbiz.de/10005868716