Download or read book Optimal Monetary Policy Under Heterogeneous Beliefs written by David Finck and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We use a New Keynesian model that features rational and non-rational households. Assuming that both the fraction of rational households and the expectations formation process are uncertain from the perspective of the central bank, we derive robust optimal discretionary monetary policy in a simple min-max framework where the central bank plays a zero-sum game versus a fictitious, malevolent evil agent. We show that the central bank is able to improve welfare if it accounts for uncertainty while the model is being distorted. Even if the central bank accounts for the worst possible outcomes while the model is being undistorted, the central bank can still reduce the welfare loss by implementing a more aggressive targeting rule that favorably affects the inflation-output stabilization trade-off.

Download or read book Optimal Monetary Policy Under Heterogeneous Beliefs of the Central Bank and the Public written by Alex Ilek and published by . This book was released on 2014 with total page 39 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 Optimal Monetary Policy Under Uncertainty written by Richard T. Froyen and published by Edward Elgar Publishing. This book was released on 2008-01-01 with total page 341 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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 In Optimal Monetary Policy Under Uncertainty, academicians and economists Richard T. Froyen and Alfred V. Guender have collaborated on presenting an informed and informative survey of optimal monetary policy literature arising during the 1970s and 1980s as a ground work for understanding current market and other economic influences on such germane issues as discretion versus commitment, target versus instrument rules, and the delegation of policy making authority within the private and public sectors. With meticulous attention to scholarship and objectivity. . . Optimal Monetary Policy Under Uncertainty is a thoughtful and thought-provoking body of work that is very strongly recommended for professional, academic, corporate and governmental economic reference collections and supplemental reading lists. Midwest Book Review Recently there has been a resurgence of interest in the study of optimal monetary policy under uncertainty. This book provides a thorough survey of the literature that has resulted from this renewed interest. The authors ground recent contributions on the science of monetary policy in the literature of the 1970s, which viewed optimal monetary policy as primarily a question of the best use of information, and studies in the 1980s that gave primacy to time inconsistency problems. This broad focus leads to a better understanding of current issues such as discretion versus commitment, target versus instrument rules, and the merits of delegation of policy authority. Casting a wide net, the authors survey the recent literature on the New Keynesian approach to optimal monetary policy in the context of the earlier literature. They emphasize the relationship between policy decisions and the information set available to the policymaker, a central focus of the earlier literature, obscured in much recent work. Optimal policy questions are considered in open as well as closed economy models and the often confusing terminology in the literature is sorted and clarified. Questions are considered within easily analysed models and the authors clearly show why these models lead to different (or equivalent) policy conclusions. Recent policy issues such as desirability of inflation targeting and the relative merits of target versus instrument rules are covered in detail. Economists in academia and in policymaking organizations who want to learn about recent developments in the area of optimal monetary policy, as well as graduate and advanced undergraduate students in macroeconomic and monetary economics, will find this volume a clear and thorough examination of the topic.

Download or read book Monetary Policy with Heterogeneous Beliefs written by Howei Wu and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the impact of monetary policy with heterogeneous beliefs in a micro-founded New Keynesian model (as developed in Kurz(2012) and Kurz, Piccillo and Wu(2013)) when there are demand shocks in the economy. The main question asked in this paper is the effect of agents' heterogeneity on monetary policy. How would heterogeneity of beliefs affect the dynamics of the economy, and most importantly, the policy rules to be adopted to maximize individual welfare on average? This paper explores the unique characteristics of belief heterogeneity by looking at the volatilities and impulse response functions derived from the model. Stabilization of the economy is no longer only evaluated by the objective of the stabilization of macro variables, it is also important to minimize fluctuations in individual consumption. The traditional policy efficient frontier changes when agents' heterogeneity is introduced and the impact of monetary policy is divided into two major regions. Policy rules interact with the dynamics of beliefs differently in each region, and therefore reach different stabilization results. I study the causes of the two policy regions and discuss how policy rules should be implemented. In this paper, I demonstrate how to generalize the system to incorporate different monetary policies into the economy. I also perform accuracy tests by computing the errors in euler equations to evaluate various assumptions of the model.

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 Optimal Monetary Policy Under Heterogeneous Consumption Baskets written by Seunghyeon Lee and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: English Abstract: We study optimal monetary policy in a multi-sector economy where consumption baskets (and hence price indices) are heterogeneous across households. Incorporating consumption basket heterogeneity reveals new redistributive channels for monetary policy, calling for the central bank to address distributional inefficiencies on top of those arising from nominal distortions. We find that optimal monetary policy in this environment (i) targets non-zero output gaps, and (ii) is redistributive in favor of the (borrowing-constrained) poor, by targeting an inflation measure that overweighs the consumption baskets of the poor compared to a measure that solely responds to price stickiness. A policy that neglects heterogeneous consumption baskets suboptimally benefits the rich at the cost of the poor.

Download or read book The Time Consistency of Optimal Monetary Policy with Heterogeneous Agents written by Stefania Albanesi and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Optimal Monetary Policy Rules written by Anna Bogomolova and published by . This book was released on 2008 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Optimal Monetary Policy with Heterogeneous Agents written by Eduardo Dávila and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper characterizes optimal monetary policy in a canonical heterogeneous-agent New Keynesian (HANK) model with wage rigidity. Under discretion, a utilitarian planner faces the incentive to redistribute towards indebted, high marginal utility households, which is a new source of inflationary bias. With commitment, i) zero inflation is the optimal long-run policy, ii) time-consistent policy requires both inflation and distributional penalties, and iii) the planner trades off aggregate stabilization against distributional considerations, so Divine Coincidence fails. We compute optimal stabilization policy in response to productivity, demand, and cost-push shocks using sequence-space methods, which we extend to Ramsey problems and welfare analysis.

Download or read book Optimal Monetary Policy in a Heterogenous Expectations Framework written by Ricardo Cavaco Nunes and published by . This book was released on 2007 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We consider a heterogenous expectations model where some agents are adaptive learners while others are rational. We consider three optimal monetary policy rules when the central bank either does not influence expectations or does influence expectations of learners or does influence expectations of learners and rational agents. We analyze a disinflation episode since this is a relevant policy setting to compare our rules. We find that there are non-negligible benefits from actively influencing expectations. Finally, we consider that the central bank may have wrong beliefs about the proportion of learners in the economy. We also find that these rules are safe to implement even when the central bank has misspecified beliefs.

Download or read book Optimal Monetary Policy with Heterogeneous Agents Updated September 2019 written by Galo Nuño and published by . This book was released on 2019 with total page 71 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze optimal monetary policy under commitment in an economy with uninsurable idiosyncratic risk, long-term nominal claims and costly inflation. Our model features two prominent redistributive channels of monetary policy: the classic Fisherian channel, and unhedged interest rate exposure (URE). The former introduces a “redistributive inflationary bias”, stemming from the fact that debtors (who benefit from inflation) have a higher marginal utility than creditors. This bias is counteracted over time by a disinflationary motive: a commitment to low future inflation raises bond prices, benefiting bond-issuing households (i.e. those with negative URE), who also have a higher marginal utility than bond-purchasing ones. The result is optimal inflation front-loading. Under certain conditions, both motives cancel out asymptotically and optimal long-run inflation is zero. Numerically, we find that optimal policy achieves first-order consumption and welfare redistribution vis-à-vis a zero inflation policy.

Download or read book Optimal Monetary Policy Under Sectoral Heterogeneity in Inflation Persistence written by Sevim Kösem Alp 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 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 Optimal Monetary Policy in a Pure Currency Economy with Heterogenous Agents written by Nicola Amendola and published by . This book was released on 2017 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper shows that, in a pure currency economy with heterogeneous agents and multiple commodities, a pecuniary externality plays a key role in making the equilibrium allocation constrained inefficient. Monetary policy intervention can help improve matters.

Download or read book Optimal Monetary Policy with Overlapping Generations of Policymakers written by Maral Shamloo and published by International Monetary Fund. This book was released on 2010-02-01 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper I study the effect of imperfect central bank commitment on inflationary outcomes. I present a model in which the monetary authority is a committee that consists of members who serve overlapping, finite terms. Older and younger generations of Monetary Policy Committee (MPC) members decide on policy by engaging in a bargaining process. I show that this setup gives rise to a continuous measure of the degree of monetary authority''s commitment. The model suggests that the lower the churning rate or the longer the tenure time, the closer social welfare will be to that under optimal commitment policy.

Download or read book Robustly Optimal Monetary Policy with Near rational Expectations written by Michael Woodford and published by . This book was released on 2005 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper considers optimal monetary stabilization policy in a forward-looking model, when the central bank recognizes that private-sector expectations need not be precisely model-consistent, and wishes to choose a policy that will be as good as possible in the case of any beliefs that are close enough to model-consistency. The proposed method offers a way of avoiding the assumption that the central bank can count on private-sector expectations coinciding precisely with whatever it plans to do, while at the same time also avoiding the equally unpalatable assumption that the central bank can precisely model private-sector learning and optimize in reliance upon a precise law of motion for expectations. The main qualitative conclusions of the rational-expectations analysis of optimal policy carry over to the weaker assumption of near-rational expectations. It is found that commitment continues to be important for optimal policy, that the optimal long-run inflation target is unaffected by the degree of potential distortion of beliefs, and that optimal policy is even more history-dependent than if rational expectations are assumed.