Optimal Monetary Policy when Agents are Learning PDF Download
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Author: Krisztina Molnár
Publisher:
ISBN:
Category :
Languages : en
Pages : 48
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Book Description
Author: Krisztina Molnár
Publisher:
ISBN:
Category :
Languages : en
Pages : 48
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Book Description
Author: Richard T. Froyen
Publisher: Edward Elgar Pub
ISBN: 9781845429645
Category : Business & Economics
Languages : en
Pages : 332
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Book Description
'Froyen and Guender have provided a thorough and careful analysis of optimal monetary policy over most of the range of theoretical models that have been used in modern macroeconomics. By providing a comprehensive and clear comparative framework they will help the student of monetary policy understand why there have been conflicting views of what policy makers should do.' - Central Banking
Author: George W. Evans
Publisher:
ISBN:
Category : Economic stabilization
Languages : en
Pages : 48
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Author: Richard Dennis
Publisher:
ISBN:
Category :
Languages : en
Pages : 36
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Book Description
To conduct policy efficiently, central banks must use available data to infer, or learn, the relevant structural relationships in the economy. However, because a central bank's policy affects economic outcomes, the chosen policy may help or hinder its efforts to learn. This paper examines whether real-time learning allows a central bank to learn the economy's underlying structure and studies the impact that learning has on the performance of optimal policies under a variety of learning environments. Our main results are as follows. First, when monetary policy is formulated as an optimal discretionary targeting rule, we find that the rational expectations equilibrium and the optimal policy are real-time learnable. This result is robust to a range of assumptions concerning private sector learning behavior. Second, when policy is set with discretion, learning can lead to outcomes that are better than if the model parameters are known. Finally, if the private sector is learning, then unannounced changes to the policy regime, particularly changes to the inflation target, can raise policy loss considerably.
Author: George W. Evans
Publisher:
ISBN:
Category : Economic stabilization
Languages : en
Pages : 48
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Book Description
Author: Natascha Hinterlang
Publisher:
ISBN: 9783957298614
Category :
Languages : en
Pages :
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Book Description
Author: Robert J. Tetlow
Publisher:
ISBN:
Category : Monetary policy
Languages : en
Pages : 60
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Book Description
Author: Mr.Marco Airaudo
Publisher: International Monetary Fund
ISBN: 1498343465
Category : Business & Economics
Languages : en
Pages : 34
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Book Description
We explore the stability properties of interest rate rules granting an explicit response to stock prices in a New-Keynesian DSGE model populated by Blanchard-Yaari non-Ricardian households. The constant turnover between long-time stock holders and asset-poor newcomers generates a financial wealth channel where the wedge between current and expected future aggregate consumption is affected by the market value of financial wealth, making stock prices non-redundant for the business cycle. We find that if the financial wealth channel is sufficiently strong, responding to stock prices enlarges the policy space for which the rational expectations equilibrium is both determinate and learnable (in the E-stability sense of Evans and Honkapohja, 2001). In particular, the Taylor principle ceases to be necessary and also mildly passive policy responses to inflation lead to determinacy and E-stability. Our results appear to be more prominent in economies characterized by a lower elasticity of substitution across differentiated products and/or more rigid labor markets.
Author: Giuseppe Ferrero
Publisher:
ISBN:
Category : Monetary policy
Languages : en
Pages : 88
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Book Description
Author: Jonathan Benchimol
Publisher: International Monetary Fund
ISBN: 1498324584
Category : Business & Economics
Languages : en
Pages : 52
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Book Description
The form of bounded rationality characterizing the representative agent is key in the choice of the optimal monetary policy regime. While inflation targeting prevails for myopia that distorts agents' inflation expectations, price level targeting emerges as the optimal policy under myopia regarding the output gap, revenue, or interest rate. To the extent that bygones are not bygones under price level targeting, rational inflation expectations is a minimal condition for optimality in a behavioral world. Instrument rules implementation of this optimal policy is shown to be infeasible, questioning the ability of simple rules à la Taylor (1993) to assist the conduct of monetary policy. Bounded rationality is not necessarily associated with welfare losses.
