What Is the Proper Perspective for Monetary Policy Optimality?
AbstractIn forward-looking models for monetary policy analysis, the conditions for full conditional optimality are not time invariant, and as a consequence imply an incentive each period for the central bank to depart from its previous optimized plan. The conditional "commitment" plan is therefore strategically incoherent. Discretionary optimality does not have this problem, but yields inferior performance. A "timeless perspective" policy rule proposed by Woodford (1999, 2003) is intended to overcome the incoherence and noncredibility of the commitment plan while yielding performance superior to that of discretionary policy behavior; this rule has received much attention. A fourth "fully timeless" alternative differs slightly from the timeless perspective rule; it is unambiguously superior from an unconditional perspective but does not dominate from the conditional perspective. The paper discusses comparisons at some length and briefly considers the sustainability of these policy strategies.
Download InfoIf 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.
Bibliographic InfoArticle provided by Institute for Monetary and Economic Studies, Bank of Japan in its journal Monetary and Economic Studies.
Volume (Year): 23 (2005)
Issue (Month): S1 (October)
Contact details of provider:
Postal: 2-1-1 Nihonbashi, Hongoku-cho, Chuo-ku, Tokyo 103
Web page: http://www.imes.boj.or.jp/
More information through EDIRC
Find related papers by JEL classification:
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Damjanovic, Tatiana & Damjanovic, Vladislav & Nolan, Charles, 2008.
"Unconditionally optimal monetary policy,"
Journal of Monetary Economics,
Elsevier, vol. 55(3), pages 491-500, April.
- Miguel Casares, 2006. "A close look at model-dependent monetary policy design," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 451-470.
- Juan Paez-Farrell, 2009. "Timeless perspective vs discretionary policymaking when the degree of inflation persistence is unknown," Discussion Paper Series 2009_14, Department of Economics, Loughborough University, revised Sep 2009.
- Kazumasa Iwata, 2005. "Monetary policy strategies : a central bank panel," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Aug, pages 507-516.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kinken).
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.