Optimal monetary policy in economies with "sticky-information" wages
AbstractIn economies with sticky-information wage setting, policymakers legitimately give attention to output stabilization as well as price-level or inflation stabilization. Consistent with Kydland and Prescott (1990), trend deviations in prices are predicted to be negatively correlated with trend deviations in output. A variant of the Taylor rule is optimal if household consumption decisions are forward-looking. Interestingly, it is essential that policy not be made contingent on the most up-to-date estimates of potential output, potential-output growth, or the natural real interest rate. New results on the “persistence problem” and a new rationalization for McCallum’s P-bar inflation equation are also presented.
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 InfoPaper provided by Federal Reserve Bank of Dallas in its series Working Papers with number 0405.
Date of creation: 2004
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-05-23 (All new papers)
- NEP-MAC-2005-05-23 (Macroeconomics)
- NEP-MON-2005-05-23 (Monetary Economics)
- NEP-SEA-2005-05-23 (South East Asia)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Wiliam Branch & John Carlson & George W. Evans & Bruce McGough, 2004.
"Monetary Policy, Endogenous Inattention, and the Volatility Trade-off,"
University of Oregon Economics Department Working Papers
2004-19, University of Oregon Economics Department, revised 15 May 2007.
- WilliamA. Branch & John Carlson & GeorgeW. Evans & Bruce McGough, 2009. "Monetary Policy, Endogenous Inattention and the Volatility Trade-off," Economic Journal, Royal Economic Society, vol. 119(534), pages 123-157, 01.
- William A. Branch & John Carlson & George W. Evans & Bruce McGough, 2004. "Monetary policy, endogenous inattention, and the volatility trade-off," Working Paper 0411, Federal Reserve Bank of Cleveland.
- William Branch & John Carlson & George W. Evans & Bruce McGough, 2006. "Monetary Policy, Endogenous Inattention, and the Volatility Trade-off," 2006 Meeting Papers 106, Society for Economic Dynamics.
- Michael Woodford, 2010.
"Optimal Monetary Stabilization Policy,"
NBER Working Papers
16095, National Bureau of Economic Research, Inc.
- Wang, Pengfei & Wen, Yi, 2007.
"Inflation dynamics: A cross-country investigation,"
Journal of Monetary Economics,
Elsevier, vol. 54(7), pages 2004-2031, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Delia Rodriguez).
If references are entirely missing, you can add them using this form.