When the central bank sets monetary policy according to a conventional or modified Taylor rule (which is known as the Taylor Principle), does this deliver the best outcome for the mac-roeconomy as a whole? This question is addressed by extending the wavelet-based control (WBC) model of Crowley...

When the central bank sets monetary policy according to a conventional or modified Taylor rule (which is known as the Taylor Principle), does this deliver the best outcome for the mac-roeconomy as a whole? This question is addressed by extending the wavelet-based control (WBC) model of Crowley...

This paper explores the implications of time varying volatility for optimal monetary policy and the measurement of welfare costs. We show how macro-economic models with linear and quadratic state dependence in their variance structure can be used for the analysis of optimal policy within the...

In this paper we analyze disinflation in two environments.One in which the central bank has perfect knowledge, in the sense that it understands and observes the process by which private sector inflation expectations are generated, and one in which the central bank has to learn the private sector...

This paper studies the formulation of monetary policy in a changing environment when knowledge regarding some aspects of the structure of the economy is imperfect and an adaptive learning technology is available to the policymaker and economic agents. As a benchmark, we develop a simple model of...

This paper explores the implications of time varying volatility for optimal monetary policy and the measurement of welfare costs. We show how macroeconomic models with linear and quadratic state dependence in their variance structure can be used for the analysis of optimal policy within the...

This paper explores the implications of time varying volatility for optimal monetary policy and the measurement of welfare costs. We show how macroeconomic models with linear and quadratic state dependence in their variance structure can be used for the analysis of optimal policy within the...

There are two main approaches to modelling monetary policy; simple instrument rules and optimal policy. We propose an alternative that combines the two by extending the loss function with a term penalizing deviations from a simple rule. We analyze the properties of the modified loss function by...

In this paper we analyze disinflation policy when a central bank has imperfect information about private sector inflation expectations but learns about them from economic outcomes, which are in part the result of the disinflation policy. The form of uncertainty is manifested as uncertainty about...

This paper uses a structurally estimated macroeconometric model, denoted the MC model, to evaluate inflation targeting in the United States. Various interest rate rules are tried with differing weights on inflation and output, and various optimal control problems are solved using differing...