Implementing Optimal Monetary Policy in New-Keynesian Models with Inertia
AbstractWe consider optimal monetary policy in New Keynesian models with inertia due to lagged effects of inflation and output. We characterize the conditions for the unconditionally optimal equilibrium and compare them with those identifying optimality from the timeless perspective. Implementation of optimal policy is considered via construction of suitable interest-rate rules. We characterize the collection of all interest-rate rules consistent with the optimal equilibrium, and we identify among them an expectations-based rule that guarantees uniqueness and stability under learning.
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Bibliographic InfoArticle provided by De Gruyter in its journal The B.E. Journal of Macroeconomics.
Volume (Year): 10 (2010)
Issue (Month): 1 (March)
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Web page: http://www.degruyter.com
Other versions of this item:
- George W. Evans & Bruce McGough, 2006. "Implementing Optimal Monetary Policy in New-Keynesian Models with Inertia," University of Oregon Economics Department Working Papers 2006-5, University of Oregon Economics Department.
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
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- George Waters, 2011. "Dangers of commitment under rational expectations," Journal of Economics and Finance, Springer, vol. 35(4), pages 371-381, October.
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