Download or read book Optimal Monetary Policy in a Model with Habit Formation written by Jeffrey C. Fuhrer and published by . This book was released on 1998 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Optimal Monetary Policy in a Model with Habit Formation written by and published by . This book was released on with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The Federal Reserve Bank of Boston presents the full text of the November 2000 article entitled "Optimal Monetary Policy in a Model with Habit Formation," written by Jeffrey C. Fuhrer. The text is available in PDF format and the paper is part of the Working Paper series. This paper investigates the behavior of a variety of small structural macro models under a variety of targeting rules. The paper examines both minimum variance policy frontiers and utility-maximizing policy.

Download or read book Optimal Monetary Policy in a Model with Habit Formation and Explicit Tax Distortions written by Jeffrey C. Fuhrer and published by . This book was released on 2001 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Optimal Monetary Policy in a Model with Habit Formation and Explicit Tax Distortions written by Jeffrey C. Fuhrer and published by . This book was released on 2001 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Optimal Monetary Policy in a Small Open Economy with Habit Formation and Nominal Rigidities written by Woon Gyu Choi and published by . This book was released on 2006 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: Introducing habit formation into an open economy macro economic model with price stickiness, we examine the characteristics of an optimal monetary policy. We find that, first, the optimal policy rule entails interest rate smoothing and responds to the lagged values of the foreign interest rate and domestic technology shocks as well as their current values. Second, habit formation enriches the dynamics of the economy with a persistent, hump-shaped response of consumption to shocks. Finally, when habit formation does matter, the optimal policy rule achieves a greater welfare improvement over alternative policy rules by achieving lower macroeconomic variability.

Download or read book Implications of Habit Formation for Optimal Monetary Policy written by Thomas Laubach and published by . This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the implications for optimal monetary policy of introducing habit formation in consumption into a general equilibrium model with sticky prices. Habit formation affects the model's endogenous dynamics through its effects on both aggregate demand and households' supply of output. We show that the objective of monetary policy consistent with welfare maximization includes output stabilization, as well as inflation and output gap stabilization. We find that the variance of output increases under optimal policy, even though it acquires a higher implicit weight in the welfare function. We also find that a simple interest rate rule nearly achieves the welfare-optimal allocation, regardless of the degree of habit formation. In this rule, the optimal responses to inflation and the lagged interest rate are both declining in the size of the habit, although super-inertial policies remain optimal.

Download or read book Optimal monetary policy in a small open economy with habit formation and nominal rigidities written by Woon Gyu ; Jung Ghoi (Yongseung) and published by . This book was released on 2003 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Optimal Monetary Policy in a Model with Habit Formation written by Jeffrey C. Fuhrer and published by . This book was released on 2000 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Rule of thumb Behaviour and Monetary Policy written by Jeffery D. Amato and published by . This book was released on 2002 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Inflation Targeting Debate written by Ben S. Bernanke and published by University of Chicago Press. This book was released on 2007-11-01 with total page 469 pages. Available in PDF, EPUB and Kindle. Book excerpt: Over the past fifteen years, a significant number of industrialized and middle-income countries have adopted inflation targeting as a framework for monetary policymaking. As the name suggests, in such inflation-targeting regimes, the central bank is responsible for achieving a publicly announced target for the inflation rate. While the objective of controlling inflation enjoys wide support among both academic experts and policymakers, and while the countries that have followed this model have generally experienced good macroeconomic outcomes, many important questions about inflation targeting remain. In Inflation Targeting, a distinguished group of contributors explores the many underexamined dimensions of inflation targeting—its potential, its successes, and its limitations—from both a theoretical and an empirical standpoint, and for both developed and emerging economies. The volume opens with a discussion of the optimal formulation of inflation-targeting policy and continues with a debate about the desirability of such a model for the United States. The concluding chapters discuss the special problems of inflation targeting in emerging markets, including the Czech Republic, Poland, and Hungary.

Download or read book Optimal Operational Monetary Policy in the Christiano Eichenbaum Evans Model of the US Business Cycle written by Stephanie Schmitt-Grohé and published by . This book was released on 2004 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper identifies optimal interest-rate rules within a rich, dynamic, general equilibrium model that has been shown to account well for observed aggregate dynamics in the postwar United States. We perform policy evaluations based on second-order accurate approximations to conditional and unconditional expected welfare. We require that interest-rate rules be operational, in the sense that they include as arguments only a few readily observable macroeconomic indicators and respect the zero bound on nominal interest rates. We find that the optimal operational monetary policy is a real-interest-rate targeting rule. That is, an interest-rate feedback rule featuring a unit inflation coefficient, a mute response to output, and no interest-rate smoothing. Contrary to existing studies, we find a significant degree of optimal inflation volatility. A key factor driving this result is the assumption of indexation to past inflation. Under indexation to long-run inflation the optimal inflation volatility is close to zero. Finally, we show that initial conditions matter for welfare rankings of policies.

Download or read book Specifying and Estimating New Keynesian Models with Instrument Rules and Optimal Monetary Policies written by and published by . This book was released on 2004 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

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 NBER Macroeconomics Annual 2005 written by Kenneth S. Rogoff and published by MIT Press. This book was released on 2006-04 with total page 479 pages. Available in PDF, EPUB and Kindle. Book excerpt: The 20th NBER Macroeconomics Annual, covering questions at the cutting edge of macroeconomics that are central to current policy debates.

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 Implications of Habit Formation for Optimal Monetary Policy written by Jeffery D. Amato and published by . This book was released on 2002 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Dominant Currency Paradigm A New Model for Small Open Economies written by Camila Casas and published by International Monetary Fund. This book was released on 2017-11-22 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: Most trade is invoiced in very few currencies. Despite this, the Mundell-Fleming benchmark and its variants focus on pricing in the producer’s currency or in local currency. We model instead a ‘dominant currency paradigm’ for small open economies characterized by three features: pricing in a dominant currency; pricing complementarities, and imported input use in production. Under this paradigm: (a) the terms-of-trade is stable; (b) dominant currency exchange rate pass-through into export and import prices is high regardless of destination or origin of goods; (c) exchange rate pass-through of non-dominant currencies is small; (d) expenditure switching occurs mostly via imports, driven by the dollar exchange rate while exports respond weakly, if at all; (e) strengthening of the dominant currency relative to non-dominant ones can negatively impact global trade; (f) optimal monetary policy targets deviations from the law of one price arising from dominant currency fluctuations, in addition to the inflation and output gap. Using data from Colombia we document strong support for the dominant currency paradigm.