Advanced Search
MyIDEAS: Login

Monetary Policy with Uncertain Parameters

Contents:

Author Info

  • Soderstrom, Ulf

Abstract

This paper shows that--in contrast to the received wisdom--uncertainty about the parameters in a dynamic macroeconomic model may lead to more aggressive monetary policy. In particular, when there is uncertainty about the persistence of inflation, it may be optimal for the central bank to respond to shocks more aggressively in order to reduce uncertainty about the future development of inflation. Uncertainty about other parameters, on the other hand, dampens the policy response. Copyright 2002 by The editors of the Scandinavian Journal of Economics.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.blackwell-synergy.com/servlet/useragent?func=synergy&synergyAction=showTOC&journalCode=sjoe&volume=104&issue=1&year=2002&part=null
File Function: link to full text
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

Volume (Year): 104 (2002)
Issue (Month): 1 ()
Pages: 125-45

as in new window
Handle: RePEc:bla:scandj:v:104:y:2002:i:1:p:125-45

Contact details of provider:
Web page: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442

Order Information:
Web: http://www.blackwellpublishing.com/subs.asp?ref=0347-0520

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Athanasios Orphanides & Volker Wieland, 1999. "Inflation zone targetting," Working Paper Series 8, European Central Bank.
  2. Stanley Fischer, 1996. "Why are central banks pursuing long-run price stability?," Proceedings, Federal Reserve Bank of Kansas City, pages 7-34.
  3. Glenn D. Rudebusch & Lars E. O. Svensson, 1998. "Policy rules for inflation targeting," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
  4. Ball, Laurence, 1999. "Efficient Rules for Monetary Policy," International Finance, Wiley Blackwell, vol. 2(1), pages 63-83, April.
  5. William Poole, 1998. "A policymaker confronts uncertainty," Speech, Federal Reserve Bank of St. Louis.
  6. Volker Wieland, 2003. "Monetary Policy and Uncertainty about the Natural Unemployment Rate," CFS Working Paper Series 2003/05, Center for Financial Studies.
  7. Christina D. Romer, 1996. "Inflation and the Growth Rate of Output," NBER Working Papers 5575, National Bureau of Economic Research, Inc.
  8. Glenn D. Rudebusch, 2001. "Is The Fed Too Timid? Monetary Policy In An Uncertain World," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 203-217, May.
  9. Svensson, Lars E.O., 1997. "Inflation Targeting: Some Extensions," Seminar Papers 625, Stockholm University, Institute for International Economic Studies.
  10. Srour, Gabriel, 1999. "Inflation Targeting under Uncertainty," Technical Reports 85, Bank of Canada.
  11. Ellingsen, Tore & Söderström, Ulf, 1998. "Monetary Policy and Market Interest Rates," Working Paper Series in Economics and Finance 242, Stockholm School of Economics, revised 08 Mar 1999.
  12. Arturo Estrella & Frederic Mishkin, 1998. "Rethinking the role of NAIRU in monetary policy: implications of model formulation and uncertainty," Research Paper 9806, Federal Reserve Bank of New York.
  13. Onatski, Alexei & Stock, James H., 2002. "Robust Monetary Policy Under Model Uncertainty In A Small Model Of The U.S. Economy," Macroeconomic Dynamics, Cambridge University Press, vol. 6(01), pages 85-110, February.
  14. Basar, Tamer & Salmon, Mark, 1990. "Credibility and the value of information transmission in a model of monetary policy and inflation," Journal of Economic Dynamics and Control, Elsevier, vol. 14(1), pages 97-116, February.
  15. Stephen G. Cecchetti, 1998. "Policy rules and targets: framing the central banker's problem," Economic Policy Review, Federal Reserve Bank of New York, issue Jun, pages 1-14.
  16. Jeffrey C. Fuhrer, 1994. "Optimal monetary policy and the sacrifice ratio," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, pages 43-84.
  17. Charles Goodhart, 1998. "Central Bankers and Uncertainty," FMG Special Papers sp106, Financial Markets Group.
  18. Brian Sack, 1998. "Does the Fed act gradually? a VAR analysis," Finance and Economics Discussion Series 1998-17, Board of Governors of the Federal Reserve System (U.S.).
  19. Bertocchi, Graziella & Spagat, Michael, 1991. "Learning, Experimentation and Monetary Policy," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1991018, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  20. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
  21. Craine, Roger, 1979. "Optimal monetary policy with uncertainty," Journal of Economic Dynamics and Control, Elsevier, vol. 1(1), pages 59-83, February.
  22. Arturo Estrella & Jeffrey C. Fuhrer, 2002. "Dynamic Inconsistencies: Counterfactual Implications of a Class of Rational-Expectations Models," American Economic Review, American Economic Association, vol. 92(4), pages 1013-1028, September.
  23. Balvers, Ronald J & Cosimano, Thomas F, 1994. "Inflation Variability and Gradualist Monetary Policy," Review of Economic Studies, Wiley Blackwell, vol. 61(4), pages 721-38, October.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bla:scandj:v:104:y:2002:i:1:p:125-45

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.