Optimal monetary policy rules : theory and estimation for OECD countries

This dissertation focuses on monetary policy rules in the OECD countries at both theoretical and empirical levels. It is divided into seven chapters.Chapter 1 presents some recent literature on monetary policy rules and introduces the goal and organization of this dissertation.Chapter 2 explores some empirical evidence of IS and Phillips curves, because these two equations have become baseline framework of monetary policy. Both backward- and forward-looking behaviors are considered. A time-varying Phillips curve is also estimated.Chapter 3 discusses two important monetary policy rules: the money supply rule and the interest rate rule. Advantages and disadvantages of these two rules are explored.Chapter 4 explores time-varying monetary policy rules with Chow break-point test and Kalman filter. The estimation results indicate that there are some structural changes in the monetary policy in the countries studied. The author also simulates the Euro-area economy under the assumption that the Euro-area had followed the time-varying US monetary policy in the 1990s and concludes that the monetary policy seems to be too tight in the Euro-area in the 1990s.Chapter 5 explores monetary policy rules under uncertainty. The author first explores empirical evidence of model uncertainty with a state-space model with Markov-switching. Based on this evidence, the author then explores monetary policy under uncertainty with two approaches: the adaptive learning and the robust control. The results indicate that uncertainty does not necessarily require caution and that state variables do not necessarily converge even in a deterministic model with the adaptive learning.Chapter 6 then explores monetary policy with financial markets. The author endogenizes the probability for the asset price bubble to increase or decrease in the next period and derives a nonlinear policy rule. The author also simulates the economy with financial asset in the presence of the zero-interest-rate bound and concludes that monetary policy should not ignore financial markets.Chapter 7 presents some concluding remarks of the dissertation.