Discretion vs. Timeless Perspective Policy-Making: the Role of Input-Output Interactions
AbstractThis paper contributes to a recent debate about the structural and institutional conditions under which discretionary monetary policy-making may be superior to timeless perspective. To this end, we formulate an input-output economy in which firms' technology employs both labor and intermediate goods produced by all firms in the economy. Unlike price stickiness, input materials reduce the slope of the New Keynesian Phillips curve, while leaving the policy maker's preference for consumption stabilization unaffected. Strategic complementarities stemming from realistic degrees of input-output interactions greatly amplify the loss of social welfare under timeless perspective, even for small departures of the economy from its steady state. By contrast, price rigidity proves to be ineffective at improving the performance of discretion relative to timeless perspective.
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 University of Copenhagen. Department of Economics in its series Discussion Papers with number 12-20.
Length: 16 pages
Date of creation: 05 Nov 2012
Date of revision:
Contact details of provider:
Postal: Øster Farimagsgade 5, Building 26, DK-1353 Copenhagen K., Denmark
Phone: (+45) 35 32 30 10
Fax: +45 35 32 30 00
Web page: http://www.econ.ku.dk
More information through EDIRC
Input-Output Economy; Monetary Policy; Discretion; Timeless Perspective;
Find related papers by JEL classification:
- E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-12-06 (All new papers)
- NEP-MAC-2012-12-06 (Macroeconomics)
- NEP-MON-2012-12-06 (Monetary Economics)
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.:
- Dennis, Richard, 2010. "When is discretion superior to timeless perspective policymaking?," Journal of Monetary Economics, Elsevier, vol. 57(3), pages 266-277, April.
- Michael Dotsey & Robert G. King, 2005.
"Pricing, production, and persistence,"
05-4, Federal Reserve Bank of Philadelphia.
- Alessio Moro, 2009. "Input-Output Structure and New Keynesian Phillips Curve," Rivista di Politica Economica, SIPI Spa, vol. 99(2), pages 145-166, April-Jun.
- Miles S. Kimball & Michael Woodford, 1994.
"The quantitative analysis of the basic neomonetarist model,"
Federal Reserve Bank of Cleveland, pages 1241-1289.
- Kimball, Miles S, 1995. "The Quantitative Analytics of the Basic Neomonetarist Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 1241-77, November.
- Miles S. Kimball, 1996. "The Quantitative Analytics of the Basic Neomonetarist Model," NBER Working Papers 5046, National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Hoffmann).
If references are entirely missing, you can add them using this form.