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Prudent Monetary Policy: Applications of Cautious LQG Control and Prediction

van der Ploeg, Frederick - C.E.P.R. Discussion Papers - 2004

less strongly to new measurements of the output gap. Prudence attenuates this policy reaction and biases the prediction of … modelling errors, since precaution reduces the power of its instruments by these variances. Also, prudence implies less weight … to new uncertain observations that are less important for welfare and introduces a bias in prediction. Prudent …

Persistent link: https://www.econbiz.de/10005114367

Unions Power, Collective Bargaining and Optimal Monetary Policy

Faia, Ester; Rossi, Lorenza - Institut für Weltwirtschaft (IfW) - 2009

We study the design of optimal monetary policy (Ramsey policies) in a model with sticky prices and unionized labour markets. Collective wage bargaining and unions monopoly power tend to dampen wage fluctuations and to amplify employment fluctuations relatively to a DNK model with walrasian...

Persistent link: https://www.econbiz.de/10005076091

Price subsidies and the conduct of monetary policy

Aïssa, Ben; Safouane, Mohamed; Rebei, Nooman - In: Journal of Macroeconomics 34 (2012) 3, pp. 769-787

This paper investigates optimized monetary policy rules in the presence of government intervention to stabilize prices of certain categories of goods and services. The paper estimates a small-scale, structural equilibrium model with a sticky-price sector and a subsidized-price sector for a large...

Persistent link: https://www.econbiz.de/10011065351

Does the ECB respond to the stock market?

Wouter Botzen, W.J.; Marey, Philip S. - Faculteit der Economische Wetenschappen en … - 2006

The role of asset prices in monetary policy has been widely debated. This paper examines the role that stock prices play in the monetary policy of the ECB. For this purpose, standard and augmented forward-looking Taylor rules are estimated for the ECB using monthly data between 1999 and 2005. Of...

Persistent link: https://www.econbiz.de/10010782656

Does the ECB respond to the stock market?

Wouter Botzen, W.J.; Marey, Philip S. - VU University Amsterdam, Faculty of Economics, Business … - 2006

Persistent link: https://www.econbiz.de/10005795736

Taylor rules, omitted variables, and interest rate smoothing in the US

Castelnuovo, Efrem - EconWPA - 2004

We test for the presence of interest rate smoothing in forward looking Taylor rules in first differences. We also consider financial and asymmetric preferences indicators. We find that interest rate smoothing is not induced by an omitted variable bias.

Persistent link: https://www.econbiz.de/10005126414

Chaotic Interest Rate Rules

Benhabib, Jess; Schmitt-Grohe, Stephanie; Uribe, Martin - Society for Computational Economics - SCE - 2001

When the Central Bank sets nominal rates as a a non-decreasing function of the inflation rate to stabilize the economy, that is it uses a Taylor Rule, the zero lower bound on interest rates may result in multiple equilibria and a liquidity trap. However, if fiscal policy is non-Ricardian, or...

Persistent link: https://www.econbiz.de/10005345604

A global analysis of liquidity effects, interest rate rules, and deflationary traps

Kudoh, Noritaka - In: Economics Bulletin 29 (2009) 2, pp. 1492-1498

The prevailing models of liquidity traps suggest that a deflationary trap is a stable steady state in a multiple equilibria model. These models implicitly assume that the central bank accelerates the process of disinflation by following a Taylor rule even though there is a long run positive...

Persistent link: https://www.econbiz.de/10008562808

Why are target interest rate changes so persistent?

Coibion, Olivier; Gorodnichenko, Yuriy - Department of Economics, College of William & Mary - 2011

We investigate the source of the high persistence in the Federal Funds Rate relative to the predictions of simple Taylor rules. While much of the literature assumes that this reflects interest-smoothing on the part of monetary policy-makers, an alternative explanation is that it represents...

Persistent link: https://www.econbiz.de/10008804906

One for Some or One for All? Taylor Rules and Interregional Heterogeneity

Coibion, Olivier; Goldstein, Daniel - Department of Economics, College of William & Mary - 2007

We document a novel empirical phenomenon: the U.S. Federal Reserve appears to set interest rates partly in response to regional economic disparities. This result is remarkably robust even after controlling for a wide variety of factors, including the central bank’s information set and a...

Persistent link: https://www.econbiz.de/10005588179