Using the Reserve Bank of Australia's MARTIN model we compare actual monetary policy decisions to a counterfactual in which the cash rate is set according to an optimal simple rule. We find that monetary policy played a crucial role in avoiding a potential recession in 2001 and mitigating the...

We derive a 2nd-order approximation of optimal policy in a broad class of nonlinear DSGE models. Using a cubic expansion of welfare and a quadratic expansion of the economyís equilibrium conditions, the Quadratic-Cubic (QC) approximation relaxes symmetry in the objective function and certainty...

Using the Reserve Bank of Australia's MARTIN model we compare actual monetary policy decisions to a counterfactual in which the cash rate is set according to an optimal simple rule. We find that monetary policy played a crucial role in avoiding a potential recession in 2001 and mitigating the...

Using the Reserve Bank of Australia's MARTIN model we compare actual monetary policy decisions to a counterfactual in which the cash rate is set according to an optimal simple rule. We find that monetary policy played a crucial role in avoiding a potential recession in 2001 and mitigating the...

Using the Reserve Bank of Australia’s MARTIN model we compare actual monetary policy decisions to a counterfactual in which the cash rate is set according to an optimal simple rule. We find that monetary policy played a crucial role in avoiding a potential recession in 2001 and mitigating the...

This paper investigates optimal monetary policy in response to fundamental innovations that affect asset prices. The fundamental innovations considered include productivity, investment efficiency, taste and bankruptcy cost innovations. I find that a central bank can stabilise the economy well...