Advanced Search

Papers Articles Authors Institutions Data (FRED®)

Abstract

In this article, Evan Koenig derives the optimal monetary policy rule for an economy with contractual wage agreements. The optimal rule has the monetary authority target a weighted average of aggregate output and the price level. In a realistic special case, the optimal rule calls for the monetary authority to target aggregate nominal spending. The optimal rule is quite general in form, encompassing policy proposals made by such prominent economists as Robert Hall and John Taylor. ; Koenig points out that if the monetary authority responds optimally to economic shocks, it will be difficult to distinguish the effects of monetary policy from the effects of the shocks themselves. So, the important contribution that monetary policy makes to the economy may easily be overlooked. Paradoxically, only insofar as monetary policy is implemented with error will it be apparent that monetary policy matters.

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.dallasfed.org/assets/documents/research/er/1995/er9502c.pdf
Download Restriction: no

Bibliographic Info

Article provided by Federal Reserve Bank of Dallas in its journal Economic and Financial Policy Review.

Volume (Year): (1995)
Issue (Month): Q II ()
Pages: 24-31

as HTML HTML with abstract plain text plain text with abstract BibTeX RIS (EndNote, RefMan, ProCite) ReDIF in new window

Handle: RePEc:fip:fedder:y:1995:i:qii:p:24-31

Contact details of provider:
Email:
Web page: http://www.dallasfed.org/
More information through EDIRC

Order Information:
Email:

Related research

Keywords: Monetary policy ; Wages;

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 HTML HTML with abstract plain text plain text with abstract BibTeX RIS (EndNote, RefMan, ProCite) ReDIF in new window

1. David Card, 1988. "Unexpected Inflation, Real Wages, and Employment Determination in Union Contracts," NBER Working Papers 2768, National Bureau of Economic Research, Inc.
   
   • Card, David, 1990. "Unexpected Inflation, Real Wages, and Employment Determination in Union Contracts," American Economic Review, American Economic Association, vol. 80(4), pages 669-88, September.
   • David Card, 1988. "Unexpected Inflation, Real Wages, and Employment Determination in Union Contracts," Working Papers 612, Princeton University, Department of Economics, Industrial Relations Section..
2. Robert J. Barro & David B. Gordon, 1983. "A Positive Theory of Monetary Policy in a Natural-Rate Model," NBER Working Papers 0807, National Bureau of Economic Research, Inc.
   
   • Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 589-610, August.
3. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
   
4. Laurence Ball & N. Gregory Mankiw, 1995. "A Sticky-Price Manifesto," NBER Working Papers 4677, National Bureau of Economic Research, Inc.
   
   • Laurence Ball & N. Gregory Mankiw, 1994. "A sticky-price manifesto," Proceedings, Federal Reserve Bank of Dallas, issue Apr.
   • Ball, Laurence & Mankiw, N. Gregory, 1994. "A sticky-price manifesto," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 41(1), pages 127-151, December.
5. Bean, Charles R, 1983. "Targeting Nominal Income: An Appraisal," Economic Journal, Royal Economic Society, vol. 93(372), pages 806-19, December.
6. Robert E. Hall, 1984. "Monetary strategy with an elastic price standard," Proceedings, Federal Reserve Bank of Kansas City, pages 137-167.
7. McLaughlin, Kenneth J., 1994. "Rigid wages?," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 383-414, December.
8. Jang-Ok Cho, 1993. "Money and Business Cycle with One-Period Nominal Contracts," Canadian Journal of Economics, Canadian Economics Association, vol. 26(3), pages 638-59, August.
9. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.

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 HTML HTML with abstract plain text plain text with abstract BibTeX RIS (EndNote, RefMan, ProCite) ReDIF in new window

Cited by:

1. Sheila Dolmas & Mark A. Wynne & Jahyeong Koo, 1997. "Rolling recessions," The Southwest Economy, Federal Reserve Bank of Dallas, issue Sep, pages 1-4.
2. Stephen D. Prowse, 1997. "Corporate financing and governance: an international perspective," The Southwest Economy, Federal Reserve Bank of Dallas, issue Sep, pages 9-10.
3. Lori L. Taylor, 1997. "Regional update," The Southwest Economy, Federal Reserve Bank of Dallas, issue Sep, pages 11.
4. Evan F. Koenig, 1997. "Is the Fed slave to a defunct economist," The Southwest Economy, Federal Reserve Bank of Dallas, issue Sep, pages 5-8.
5. Guender, Alfred V., 2002. "Optimal and efficient monetary policy rules in a forward-looking model," Journal of Macroeconomics, Elsevier, vol. 24(1), pages 41-49, March.
6. Stephen P. A. Brown & Mine K. Yücel, 2001. "Energy prices and aggregate economic activity: an interpretive survey," Working Papers 0102, Federal Reserve Bank of Dallas.
   
   • Brown, Stephen P. A. & Yucel, Mine K., 2002. "Energy prices and aggregate economic activity: an interpretative survey," The Quarterly Review of Economics and Finance, Elsevier, vol. 42(2), pages 193-208.
7. Evan F. Koenig, 2011. "Monetary policy, financial stability, and the distribution of risk," Working Papers 1111, Federal Reserve Bank of Dallas.

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:fip:fedder:y:1995:i:qii:p:24-31

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Diane Rosenberger).

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.

---

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.

Privacy Legal