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How forward-looking is optimal monetary policy? Author info | Abstract | Publisher info | Download info | Related research | Statistics Marc Paolo Giannoni
Michael Woodford
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We calculate optimal monetary policy rules for several variants of a simple optimizing model of the monetary transmission mechanism with sticky prices and/or wages. We show that robustly optimal rules can be represented by interest-rate feedback rules that generalize the celebrated proposal of Taylor (1993). Optimal rules, however, require that the current interest rate operating target depend positively on the recent past level of the operating target, and its recent rate of increase, in a way that is characteristic of estimated central bank reaction functions, but not of Taylor's proposal.
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Article provided by Federal Reserve Bank of Cleveland in its journal Proceedings .
Volume (Year): (2003)
Issue (Month): ()
Pages: 1425-1483
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Handle: RePEc:fip:fedcpr:y:2003:p:1425-1483Contact details of provider: Postal: 1455 East 6th St., Cleveland OH 44114 Phone: 216.579.2000 Web page: http://www.clevelandfed.org/ More information through EDIRC
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Keywords: Monetary policy ; Banks and banking ; Central ; Inflation (Finance) ; Cited by : (explanations , 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.)
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