The Effect of Discounting on Policy Choices in Inflation Targeting Regimes
AbstractThis article assesses the implications of discounting on a result derived by Bean (1998): that in a model of monetary policy where policy acts with a lag, the outcomes of monetary policy are very similar for a wide range of preferences of the monetary authority with respect to inflation and output stability. We show that when the authority discounts the future, outcomes become more sensitive to its preferences, and that it is important to take the discount rate into account when examining the question of how the authority's remit should be specified. Copyright 2006 Royal Economic Society.
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Bibliographic InfoArticle provided by Royal Economic Society in its journal The Economic Journal.
Volume (Year): 116 (2006)
Issue (Month): 508 (01)
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- Tatiana Kirsanova & Sven Jari Stehn & David Vines, 2006.
"Five-Equation Macroeconomics A Simple View of the Interactions Between Fiscal Policy and Monetary Policy,"
0610, Exeter University, Department of Economics.
- Kirsanova, Tatiana & Stehn, Sven Jari & Vines, David, 2006. "Five-Equation Macroeconomics: A Simple View of the Interactions Between Fiscal Policy and Monetary Policy," CEPR Discussion Papers 5464, C.E.P.R. Discussion Papers.
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