A 'Timeless Perspective' on Optimality in Forward-Looking Rational Expectations Models

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A 'Timeless Perspective' on Optimality in Forward-Looking Rational Expectations Models

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Blake, Andrew P. (National Institute of Economic and Social Research)

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Andrew Peter Blake

Abstract

This paper discusses the 'timeless perspective' optimisation concept with reference to a much-studied forward-looking rational expectations model. We establish that this policy, as usually described, is not always superior to a time consistent alternative on the basis of the stochastic equilibrium. We derive an alternative 'timelessly optimal' rule which is globally optimal with respect to the unconditional variance and is therefore more supportable as a time consistent equilibrium.

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Paper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2002 with number 30.

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Date of creation: 29 Aug 2002
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Handle: RePEc:ecj:ac2002:30

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Paper
- Andrew P. Blake, 2001. "A `Timeless Perspective' on Optimality in Forward-Looking Rational Expectations Models," NIESR Discussion Papers 188, National Institute of Economic and Social Research. [Downloadable!]

This paper has been announced in the following NEP Reports:

NEP-ALL-2002-07-08 (All new papers)

Cited by:
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Lars E.O. Svensson & Michael Woodford, 2004. "Implementing Optimal Policy through Inflation-Forecast Targeting," NBER Chapters, in: The Inflation-Targeting Debate, pages 19-92 National Bureau of Economic Research, Inc. [Downloadable!]
Other versions:
- Lars E. O. Svensson & Michael Woodford, 2003. "Implementing Optimal Policy through Inflation-Forecast Targeting," NBER Working Papers 9747, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
- Svensson, Lars E O & Woodford, Michael, 2004. "Implementing Optimal Policy Through Inflation-Forecast Targeting," CEPR Discussion Papers 4229, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
Kirsanova, Tatiana & Vines, David & Wren-Lewis, Simon, 2006. "Inflation Bias with Dynamic Phillips Curves," CEPR Discussion Papers 5534, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
Jagjit Chadha & Luisa Corrado, 2006. "Sunspots and Monetary Policy," Economics and Finance Discussion Papers 06-06, Economics and Finance Section, School of Social Sciences, Brunel University. [Downloadable!]
Benigno, Pierpaolo & Woodford, Michael, 2006. "Linear-Quadratic Approximation of Optimal Policy Problems," CEPR Discussion Papers 5964, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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- Pierpaolo Benigno & Michael Woodford, 2008. "Linear-Quadratic Approximation of Optimal Policy Problems," Discussion Papers 0809-01, Columbia University, Department of Economics. [Downloadable!]
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Tatiana Damjanovic & Vladislav Damjanovic & Charles Nolan, 2006. " Optimal Time Consistent Monetary Policy," CDMA Working Paper Series 0606, Centre for Dynamic Macroeconomic Analysis, revised Jan 2007. [Downloadable!]
Tatiana Damjanovic & Vladislav Damjanovic & Charles Nolan, 2005. " Optimal Monetary Policy Rules from a Timeless Perspective," CDMA Working Paper Series 0510, Centre for Dynamic Macroeconomic Analysis. [Downloadable!]
Dennis, Richard & Söderström, Ulf, 2002. "How Important Is Precommitment for Monetary Policy?," Working Paper Series 139, Sveriges Riksbank (Central Bank of Sweden). [Downloadable!]
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- Ulf Soderstrom & Richard Dennis, 2003. "How Important is Precommitment for Monetary Policy?," Computing in Economics and Finance 2003 49, Society for Computational Economics.
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- Dennis, Richard & Soderstrom, Ulf, 2006. "How Important Is Precommitment for Monetary Policy?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(4), pages 847-872, June. [Downloadable!] (restricted)
Tatiana Damjanovic & Vladislav Damjanovic & Charles Nolan, 2007. " Unconditionally Optimal Monetary Policy," CDMA Working Paper Series 0721, Centre for Dynamic Macroeconomic Analysis. [Downloadable!]
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Niklas J. Westelius, 2006. "Imperfect Transparency and Shifts in the Central Bank's Output Gap Target," Hunter College Department of Economics Working Papers 415, Hunter College: Department of Economics, revised 2008. [Downloadable!]
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Other versions:
- Richard Dennis, 2008. "Timeless perspective policymaking: When is discretion superior?," Working Paper Series 2008-21, Federal Reserve Bank of San Francisco. [Downloadable!]
Christian Jensen & Bennett C. McCallum, 2002. "The Non-Optimality of Proposed Monetary Policy Rules Under Timeless-Perspective Commitment," NBER Working Papers 8882, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- Jensen, Christian & McCallum, Bennett T., 2002. "The non-optimality of proposed monetary policy rules under timeless perspective commitment," Economics Letters, Elsevier, vol. 77(2), pages 163-168, October. [Downloadable!] (restricted)
Stephan Sauer, 2007. "Discretion rather than rules? When is discretionary policy-making better than the timeless perspective?," Working Paper Series 717, European Central Bank. [Downloadable!]
Loisel, O., 2005. "Central Bank Reputation in a Forward-Looking Model," Documents de Travail 127, Banque de France. [Downloadable!]
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- Loisel, Olivier, 2008. "Central bank reputation in a forward-looking model," Journal of Economic Dynamics and Control, Elsevier, vol. 32(11), pages 3718-3742, November. [Downloadable!] (restricted)
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. [Downloadable!]
Michal Horvath, 2006. " How to Deal with Increased Public Debt," CDMA Working Paper Series 0607, Centre for Dynamic Macroeconomic Analysis, revised Jun 2009. [Downloadable!]
Jagjit S. Chadha & Luisa Corrado, 2006. " On the Determinacy of Monetary Policy under Expectational Errors," CDMA Working Paper Series 0603, Centre for Dynamic Macroeconomic Analysis, revised Apr 2007. [Downloadable!]
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- Chadha, J.S. & Corrado, L., 2007. "On the Determinacy of Monetary Policy under Expectational Errors," Cambridge Working Papers in Economics 0722, Faculty of Economics, University of Cambridge. [Downloadable!]

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