Advanced Search
MyIDEAS: Login

On the Optimality of Delay in 'Monetary Policy As a Process of Search'

Contents:

Author Info

  • Doyle, Matthew

Abstract

Caplin and Leahy (1996) show that, when central bankers learn about the economy by observing its response to policy shock, cautious monetary policy may be ineffectual as private agents correctly anticipate that today's interest rate cuts are likely to be followed by future cuts. The central banker has to account for this strategic response of private agents to small interest rate cuts by acting more aggressively than would otherwise be the case. Caplin and Leahy, however, do not examine whether or not this strategic behavior on the part of private agents represents a constraint on the ability of monetary policy to implement optimal investment outcomes. The purpose of this paper is to show that the kinds of strategic interactions between investors and the central banker highlighted by Caplin and Leahy affect only the policy rule and do not influence the investment outcome in equilibrium.

Download Info

If 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.
File URL: http://www.econ.iastate.edu/sites/default/files/publications/papers/p3846-2006-02-22.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 12503.

as in new window
Length:
Date of creation: 22 Feb 2006
Date of revision:
Handle: RePEc:isu:genres:12503

Contact details of provider:
Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
Email:
Web page: http://www.econ.iastate.edu
More information through EDIRC

Related research

Keywords: monetary policy; strategy delay;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Caplin, Andrew & Leahy, John, 1996. "Monetary Policy as a Process of Search," American Economic Review, American Economic Association, vol. 86(4), pages 689-702, September.
  2. Yetman, James, 2003. "Probing potential output: Monetary policy, credibility, and optimal learning under uncertainty," Journal of Macroeconomics, Elsevier, vol. 25(3), pages 311-330, September.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:isu:genres:12503

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Stephanie Bridges) The email address of this maintainer does not seem to be valid anymore. Please ask Stephanie Bridges to update the entry or send us the correct address.

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.