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Learning, uncertainty and Central Bank activism in an economy with strategic interactions Author info | Abstract | Publisher info | Download info | Related research | Statistics Natacha Valla () (European Central Bank, Kaiserstrasse 29, Postfach 16 03 19, 60066 Frankfurt am Main, Germany. )
Martin Ellison () (University of Warwick, Department of Economics, Coventry CV4 7AL, United Kingdom. )
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In this paper we examine the optimal level of central bank activism in a standard model of monetary policy with uncertainty, learning and strategic interactions. We calibrate the model using G7 data and find that the presence of strategic interactions between the central bank and private agents creates an additional motivation for caution in optimal monetary policy. An active policy designed to help learning and reduce future uncertainty creates extra volatility in inflation expectations, which is detrimental to welfare. JEL Classification: D81; D83; D84; E52; E58.
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Paper provided by European Central Bank in its series Working Paper Series with number
28.
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Length: 35 pages
Date of creation: Aug 2000Date of revision:
Handle: RePEc:ecb:ecbwps:20000028Contact details of provider: Postal: Postfach 16 03 19, Frankfurt am Main, Germany Phone: +49 69 1344 0 Fax: +49 69 1344 6000 Web page: http://www.ecb.europa.eu/home/html/index.en.html More information through EDIRC
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Keywords: Activism learning monetary policy strategic interactions uncertainty. Other versions of this item:
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