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The Performance of Forecast-Based Monetary Policy Rules under Model Uncertainty Author info | Abstract | Publisher info | Download info | Related research | Statistics Andrew Levin
Volker Wieland
John C. Williams
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We investigate the performance of forecast-based monetary policy rules using five macroeconomic models that reflect a wide range of views on aggregate dynamics. We identify the key characteristics of rules that are robust to model uncertainty; such rules respond to the one-year-ahead inflation forecast and to the current output gap and incorporate a substantial degree of policy inertia. In contrast, rules with longer forecast horizons are less robust and are prone to generating indeterminacy. Finally, we identify a robust benchmark rule that performs very well in all five models over a wide range of policy preferences.
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Article provided by American Economic Association in its journal American Economic Review .
Volume (Year): 93 (2003)
Issue (Month): 3 (June)
Pages: 622-645
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Handle: RePEc:aea:aecrev:v:93:y:2003:i:3:p:622-645Contact details of provider: Email: Web page: http://www.aeaweb.org/aer/ More information through EDIRC
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Paper Andrew Levin & John C. Williams, 2000.
"The Performance of Forecast-Based Monetary Policy Rules under Model Uncertainty ,"
Econometric Society World Congress 2000 Contributed Papers
1781, Econometric Society.
[Downloadable!] John C. Williams & Andrew T. Levin & Volker Wieland, 2001.
"The performance of forecast-based monetary policy rules under model uncertainty ,"
Working Paper Series
068, European Central Bank.
[Downloadable!] Andrew Levin & Volker Wieland & John C. Williams, 2001.
"The performance of forecast-based monetary policy rules under model uncertainty ,"
Finance and Economics Discussion Series
2001-39, Board of Governors of the Federal Reserve System (U.S.).
[Downloadable!] Andrew Levin & Volker Wieland & John Williams, 2000.
"The Performance Of Forecast-Based Monetary Policy Rules Under Model Uncertainty ,"
Computing in Economics and Finance 2000
203, Society for Computational Economics.
Andrew Levin & Volker Wieland & John C. Williams, 2003.
"The Performance of Forecast-Based Monetary Policy Rules under Model Uncertainty ,"
CFS Working Paper Series
2003/06, Center for Financial Studies.
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