News Shocks and Optimal Simple Rules

This paper evaluates the performance of optimal simple policy rules in the presence of news shocks. It is shown that the inclusion of forward-looking elements enhances the performance of simple optimized interest rate rules when agents learn about future disturbances in advance. We provide a rationale for this result by demonstrating that, if shocks are news shocks, the optimal unrestricted control rule under commitment contains as a basic principle a forward-looking element.

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Year of publication:	2011
Authors:	Winkler, Roland C. ; Wohltmann, Hans-Werner
Published in:	Review of Economics. - Lucius & Lucius, ISSN 0948-5139. - Vol. 62.2011, 1, p. 1-11
Publisher:	Lucius & Lucius

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Extent:	text/html
Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10011199909