Share

Welfare-maximizing Monetary Policy Under Parameter Uncertainty

2007 Monetary policy
Download Welfare-maximizing Monetary Policy Under Parameter Uncertainty PDF Online Free

Author :
Release : 2007
Genre : Monetary policy
Kind : eBook
Book Rating : /5 ( reviews)

GET EBOOK


Book Synopsis Welfare-maximizing Monetary Policy Under Parameter Uncertainty by : Rochelle Mary Edge

Download or read book Welfare-maximizing Monetary Policy Under Parameter Uncertainty written by Rochelle Mary Edge. This book was released on 2007. 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.

Welfare-maximizing Monetary Policy Under Parameter Uncertainty

2007 Monetary policy
Download Welfare-maximizing Monetary Policy Under Parameter Uncertainty PDF Online Free

Author :
Release : 2007
Genre : Monetary policy
Kind : eBook
Book Rating : /5 ( reviews)

GET EBOOK


Book Synopsis Welfare-maximizing Monetary Policy Under Parameter Uncertainty by : Rochelle Mary Edge

Download or read book Welfare-maximizing Monetary Policy Under Parameter Uncertainty written by Rochelle Mary Edge. This book was released on 2007. 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.

Designing a Simple Loss Function for Central Banks

2017-07-21 Business & Economics
Download Designing a Simple Loss Function for Central Banks PDF Online Free

Author :
Release : 2017-07-21
Genre : Business & Economics
Kind : eBook
Book Rating : 752/5 ( reviews)

GET EBOOK


Book Synopsis Designing a Simple Loss Function for Central Banks by : Davide Debortoli

Download or read book Designing a Simple Loss Function for Central Banks written by Davide Debortoli. This book was released on 2017-07-21. 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.

Monetary Policy Under Uncertainty in Micro-Founded Macroeconometric Models

2007
Download Monetary Policy Under Uncertainty in Micro-Founded Macroeconometric Models PDF Online Free

Author :
Release : 2007
Genre :
Kind : eBook
Book Rating : /5 ( reviews)

GET EBOOK


Book Synopsis Monetary Policy Under Uncertainty in Micro-Founded Macroeconometric Models by : Andrew T. Levin

Download or read book Monetary Policy Under Uncertainty in Micro-Founded Macroeconometric Models written by Andrew T. Levin. This book was released on 2007. 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.

Model Uncertainty. Learning, and the Gains from Coordination

1988-12-27 Business & Economics
Download Model Uncertainty. Learning, and the Gains from Coordination PDF Online Free

Author :
Release : 1988-12-27
Genre : Business & Economics
Kind : eBook
Book Rating : 148/5 ( reviews)

GET EBOOK


Book Synopsis Model Uncertainty. Learning, and the Gains from Coordination by : International Monetary Fund

Download or read book Model Uncertainty. Learning, and the Gains from Coordination written by International Monetary Fund. This book was released on 1988-12-27. Available in PDF, EPUB and Kindle. Book excerpt: The paper considers gains from international economic policy coordination when there is uncertainty concerning the functioning of the world economy, but also learning about the “true” model on the part of policymakers. The paper reports estimates of plausible alternative versions of a standard, two-country model. Activist policy (either coordinated or uncoordinated) may produce large welfare losses in the absence of learning, if policymakers believe in the wrong model; hence exogenous money targets and freely flexible exchange rates may be best. However, model learning (from observations on macroeconomic variables) causes coordinated policies to dominate activist uncoordinated policies or exogenous money targets.

You may also like...