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Robust Monetary Policy with Imperfect Knowledge

Williams, John C; Orphanides, Athanasios - Society for Computational Economics - SCE - 2005

about the true structure of the economy. Private agents rely on an adaptive learning technology to form expectations and … learning and misperceptions of natural rates call for more aggressive responses to inflation that would be optimal under … potential misspecification of private sector learning and the magnitude of variation in natural rates. …

Persistent link: https://www.econbiz.de/10005132680

Learning in a Misspecified VAR Model

Guse, Eran A. - Society for Computational Economics - SCE - 2005

I introduce a method to transform a T-map when agents form expectations using a misspecified learning mechanism … "Restricted Perceptions Equilibria" (RPE) of such a model are learnable under adaptive learning. I present the New Keynesian … inertia where determinacy only changes with inertia if the REE and RPE are not stable under learning. Under restricted …

Persistent link: https://www.econbiz.de/10005345066

Optimal Nonlinear Policy: Signal Extraction with a Non-Normal Prior

Swanson, Eric - Society for Computational Economics - SCE - 2005

The literature on optimal monetary policy typically makes three major assumptions: 1) policymakersâ€™ preferences are quadratic, 2) the economy is linear, and 3) stochastic shocks and policymakersâ€™ prior beliefs about unobserved variables are normally distributed. This paper relaxes...

Persistent link: https://www.econbiz.de/10005132649

Learning about which measure of inflation to target

Zanna, Luis-Felipe; Airaudo, Marco - Society for Computational Economics - SCE - 2005

Using a closed economy model with a flexible-price good and a sticky-price good we study the conditions under which interest rate rules induce real determinacy and, more importantly, the MSV solution is learnable in the E-stability sense proposed by Evans and Honkapohja (2001). We show that...

Persistent link: https://www.econbiz.de/10005537501

How the Bundesbank really conducted monetary policy

Gerberding, Christina; Seitz, Franz; Worms, Andreas - Society for Computational Economics - SCE - 2005

Papers estimating the reaction function of the Bundesbank generally find that ist monetary policy from the 1970s to 1998 can well be captured by a standard Taylor rule according to which the central bank responds to the output gap and to deviations of inflation from target, but not to monetary...

Persistent link: https://www.econbiz.de/10005132654

Time Consistent Policy in Markov Switching Models

Zampolli, Fabrizio; Blake, Andrew P. - Society for Computational Economics - SCE - 2005

In this paper we consider the quadratic optimal control problem with regime shifts and forward-looking agents. This extends the results of Zampolli (2003) who considered models without forward-looking expectations. Two algorithms are presented: The first algorithm computes the solution of a...

Persistent link: https://www.econbiz.de/10005132660

Real-time data for Norway: Output gap revisions and challenges for monetary policy

BERNHARDSEN, TOM; EITRHEIM, ØYVIND - Society for Computational Economics - SCE - 2005

Monetary policy conducted in real time has to take into account the preliminary nature of recent national accounts data. Not only recent data, but also figures dating many years back are potentially subject to revisions. This means that there is a danger that an important part of the central...

Persistent link: https://www.econbiz.de/10005132699

Simple Pricing Rules, the Phillips Curve and the Microfoundations of Inflation Persistence

Mash, Richard - Society for Computational Economics - SCE - 2005

We analyze the microfoundations of the Phillips curve, a key relationship in general macroeconomics and models of monetary policy in particular. The form in current widespread use includes both forward looking expected inflation and lagged inflation. The presence of lagged inflation is necessary...

Persistent link: https://www.econbiz.de/10005342993

Monetary Concequences of Alternative Fiscal Policy Rules

Railavo, Jukka - Society for Computational Economics - SCE - 2005

In this paper we analyse the monetary impact of alternative fiscal policy rules using the debt and deficit, both mentioned as measures of fiscal policy performance in the Stability and Growth Pact (SGP). We use a New Keynesian model, with distortionary taxation and an appropriately defined...

Persistent link: https://www.econbiz.de/10005345042

Inflation Targeting, Committee Decision Making and Uncertainty: The case of the Bank of England's MPC

Holly, Sean; Bhattacharjee, Arnab - Society for Computational Economics - SCE - 2005

Policymaking at the Bank of England has provided detailed information on both the decisions of individual members of the Monetary Policy Committee. We consider this decision making process in the context of a model in which inflation forecast targeting is used but there is heterogeneity among...

Persistent link: https://www.econbiz.de/10005345075