Monetary Policy and Lexicographic Preference Ordering
Abstract
In this Paper we argue that the objectives given to the European Central Bank in the Maastricht Treaty are not well represented by the widely used weighted sum of squared deviations of inflation and output from target (plus possibly terms in squared changes in interest rates to pick up interest rate smoothing). Instead the stated lexicographic ordering should be taken at face value and its implications explored fully. We set out a number of models that do this, and comment on their implications.Download Info
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Bibliographic Info
Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4247.Length:
Date of creation: Feb 2004
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Handle: RePEc:cpr:ceprdp:4247
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Related research
Keywords: european central bank; lexicographic preferences; monetary policy; time inconsistency;Find related papers by JEL classification:
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-02-29 (All new papers)
- NEP-MAC-2004-02-29 (Macroeconomics)
- NEP-MON-2004-02-29 (Monetary Economics)
References
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Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Zeno Rotondi & Giacomo Vaciago, 2007. "Lessons from the ECB experience: Frankfurt still matters!," DISCE - Quaderni dell'Istituto di Economia e Finanza ief0070, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
- Alberto Locarno, 2006.
"Imperfect knowledge, adaptive learning and the bias against activist monetary policies,"
Temi di discussione (Economic working papers)
590, Bank of Italy, Economic Research and International Relations Area.
- Alberto Locarno, 2007. "Imperfect Knowledge, Adaptive Learning, and the Bias Against Activist Monetary Policies," International Journal of Central Banking, International Journal of Central Banking, vol. 3(3), pages 47-85, September.
- Q. Farooq Akram & Ragnar Nymoen, 2006. "Model selection for monetary policy analysis – Importance of empirical validity," Working Paper 2006/13, Norges Bank.
- Akram, Q. Farooq & Nymoen , Ragnar, 2007.
"Model selection for monetary policy analysis How important is empirical validity?,"
Memorandum
14/2007, Oslo University, Department of Economics.
- Q. Farooq Akram & Ragnar Nymoen, 2009. "Model Selection for Monetary Policy Analysis: How Important is Empirical Validity?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(1), pages 35-68, 02.
- Ludovic Renou & Karl H. Schlag, 2009. "From Ordients to Optimization: Substitution Effects without Differentiability," Discussion Papers in Economics 09/6, Department of Economics, University of Leicester.
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