Download or read book Optimal Monetary Policy in a Micro founded Model with Parameter Uncertainty written by Takeshi Kimura and published by . This book was released on 2003 with total page 70 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Welfare maximizing Monetary Policy Under Parameter Uncertainty written by Rochelle Mary Edge and published by . This book was released on 2007 with total page 78 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines welfare-maximizing monetary policy in an estimated micro-founded general equilibrium model of the U.S. economy where the policymaker faces uncertainty about model parameters. Uncertainty about parameters describing preferences and technology implies not only uncertainty about the dynamics of the economy. It also implies uncertainty about the model's utility-based welfare criterion and about the economy's natural rate measures of interest and output. We analyze the characteristics and performance of alternative monetary policy rules given the estimated uncertainty regarding parameter estimates. We find that the natural rates of interest and output are imprecisely estimated. We then show that, relative to the case of known parameters, optimal policy under parameter uncertainty responds less to natural-rate terms and more to other variables, such as price and wage inflation and measures of tightness or slack that do not depend on natural rates.
Download or read book Optimal Policy Under Model Uncertainty written by and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we propose a novel methodology to analyze optimal policies under model uncertainty in micro-founded macroeconomic models. As an application we assess the relevant sources of uncertainty for the optimal conduct of monetary policy within (parameter uncertainty) and across models (specification uncertainty) using EU 13 data. Parameter uncertainty matters only if the zero bound on interest rates is explicitly taken into account. In any case, optimal monetary policy is highly sensitive with respect to specification uncertainty implying substantial welfare gains of a robust-optimal rule that incorporates this risk. -- Optimal monetary policy ; model uncertainty ; Bayesian model estimation
Download or read book Robust Optimal Policy in a Forward looking Model with Parameter and Shock Uncertainty written by Marc Paolo Giannoni and published by . This book was released on 2006 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper characterizes a robust optimal policy rule in a simple forward-looking model, when the policymaker faces uncertainty about model parameters and shock processes. We show that the robust optimal policy rule is likely to involve a stronger response of the interest rate to fluctuations in inflation and the output gap than is the case in the absence of uncertainty. Thus parameter uncertainty alone does not necessarily justify a small response of monetary policy to perturbations. However uncertainty may amplify the degree of "super-inertia" required by optimal monetary policy. We finally discuss the sensitivity of the results to alternative assumptions.
Download or read book Parameters Instability Model Uncertainty and Optimal Monetary Policy written by Carlo A. Favero and published by . This book was released on 2001 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Real time Optimal Monetary Policy with Undistinguishable Model Parameters and Shock Processes Uncertainty written by and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Optimal Monetary Policy Under Bounded Rationality written by Jonathan Benchimol and published by International Monetary Fund. This book was released on 2019-08-02 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book Monetary Policy Under Uncertainty in Micro Founded Macroeconometric Models written by Andrew T. Levin and published by . This book was released on 2007 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We use a micro-founded macroeconometric modeling framework to investigate the design of monetary policy when the central bank faces uncertainty about the true structure of the economy. We apply Bayesian methods to estimate the parameters of the baseline specification using postwar U.S. data and then determine the policy under commitment that maximizes household welfare. We find that the performance of the optimal policy is closely matched by a simple operational rule that focuses solely on stabilizing nominal wage inflation. Furthermore, this simple wage stabilization rule is remarkably robust to uncertainty about the model parameters and to various assumptions regarding the nature and incidence of the innovations. However, the characteristics of optimal policy are very sensitive to the specification of the wage contracting mechanism, thereby highlighting the importance of additional research regarding the structure of labor markets and wage determination.
Download or read book Designing a Simple Loss Function for Central Banks written by Davide Debortoli and published by International Monetary Fund. This book was released on 2017-07-21 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: Yes, it makes a lot of sense. This paper studies how to design simple loss functions for central banks, as parsimonious approximations to social welfare. We show, both analytically and quantitatively, that simple loss functions should feature a high weight on measures of economic activity, sometimes even larger than the weight on inflation. Two main factors drive our result. First, stabilizing economic activity also stabilizes other welfare relevant variables. Second, the estimated model features mitigated inflation distortions due to a low elasticity of substitution between monopolistic goods and a low interest rate sensitivity of demand. The result holds up in the presence of measurement errors, with large shocks that generate a trade-off between stabilizing inflation and resource utilization, and also when ensuring a low probability of hitting the zero lower bound on interest rates.
Download or read book Monetary Policy Under Uncertainlty in Micro founded Macroeconometric Models written by Andrew Theo Levin and published by . This book was released on 2005 with total page 65 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Monetary Policy Parameter Uncertainty and Optimal Learning written by Volker Wieland and published by . This book was released on 1999 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Model uncertainty optimal monetary policy and the preferences of the fed written by Efrem Castelnuovo and published by . This book was released on 2001 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Optimal Monetary Policy Under Model Uncertainty Without Commitment written by Anna Orlik and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Monetary Policy with Model Uncertainty written by Lars E. O. Svensson and published by . This book was released on 2005 with total page 84 pages. Available in PDF, EPUB and Kindle. Book excerpt: "We examine optimal and other monetary policies in a linear-quadratic setup with a relatively general form of model uncertainty, so-called Markov jump-linear-quadratic systems extended to include forward-looking variables. The form of model uncertainty our framework encompasses includes: simple i.i.d. model deviations; serially correlated model deviations; estimable regime-switching models; more complex structural uncertainty about very different models, for instance, backward- and forward-looking models; time-varying central-bank judgment about the state of model uncertainty; and so forth. We provide an algorithm for finding the optimal policy as well as solutions for arbitrary policy functions. This allows us to compute and plot consistent distribution forecasts---fan charts---of target variables and instruments. Our methods hence extend certainty equivalence and "mean forecast targeting" to more general certainty non-equivalence and "distribution forecast targeting.""--National Bureau of Economic Research web site
Download or read book Monetary Policy and Uncertainty in an Empirical Small Open Economy Model written by Alejandro Justiniano and published by . This book was released on 2009 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper explores optimal policy design in an estimated model of three small open economies: Australia, Canada and New Zealand. Within a class of generalized Taylor rules, we show that to stabilize a weighted objective of output, consumer price inflation and nominal interest variation optimal policy does not respond to the nominal exchange. This is despite the presence of local currency pricing and due, in large part, to observed exchange rate disconnect in these economies. Optimal policies that account for the uncertainty of model estimates, as captured by the parameters' posterior distrbution, similarly exhibit a lack of exchange rate response. In contrast to Brainard (1967), the presence of parameter uncertainty can lead to more or less aggressive policy responses, depending on the model at hand.
Download or read book Model Uncertainty and Optimal Monetary Policy written by Marc Paolo Giannoni and published by . This book was released on 2001 with total page 388 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Optimal Monetary Policy Under Uncertainty written by Richard T. Froyen and published by . This book was released on 2007 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
