This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Efficient simple policy rules and the implications of potential output uncertainty

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Aaron Drew
Benjamin Hunt (Reserve Bank of New Zealand)

Additional information is available for the following registered author(s):

Abstract

Simple rules for guiding monetary policy actions have been shown to achieve policy objectives effectively. In many of these simple rules, policy prescriptions depend on the economy's level of potential output. However, potential output is unobservable and is estimated with uncertainty. We examine the effects that this uncertainty has on the stabilisation properties of three classes of simple efficient policy rules. Although the stabilisation properties deteriorate under uncertainty, the deterioration is less pronounced for rules that use forecasts of inflation rather than just contemporaneous inflation. Under the uncertainty considered, the magnitudes of the efficient response coefficients tend to increase.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. 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.rbnz.govt.nz/research/discusspapers/g99_5.pdf
File Format:
File Function:
Download Restriction: no

Publisher Info
Paper provided by Reserve Bank of New Zealand in its series Reserve Bank of New Zealand Discussion Paper Series with number G99/5.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 24p
Date of creation: Aug 1999
Date of revision:
Handle: RePEc:nzb:nzbdps:1999/05

Contact details of provider:
Postal: P.O. Box 2498, Wellington
Phone: 64 4 471-3767
Fax: 64 4 471-2270
Email:
Web page: http://www.rbnz.govt.nz
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Reserve Bank of New Zealand Knowledge Centre).

Related research
Keywords:

Other versions of this item:

Find related papers by JEL classification:
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation

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.:

  1. Richard Clarida & Jordi Gali & Mark Gertler, 1997. "Monetary Policy Rules in Practice: Some International Evidence," NBER Working Papers 6254, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Jeffrey C. Fuhrer, 1994. "Optimal monetary policy in a model of overlapping price contracts," Working Papers 94-2, Federal Reserve Bank of Boston. [Downloadable!]
  3. Amano, Robert & Coletti, Don & Macklem, Tiff, 1999. "Monetary Rules When Economic Behaviour Changes," Working Papers 99-8, Bank of Canada. [Downloadable!]
    Other versions:
  4. Kuttner, Kenneth N, 1994. "Estimating Potential Output as a Latent Variable," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(3), pages 361-68, July.
  5. Bennett T. McCallum & Edward Nelson, 1998. "Performance of Operational Policy Rules in an Estimated Semi-Classical Structural Model," NBER Working Papers 6599, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Cogley, Timothy & Nason, James M., 1995. "Effects of the Hodrick-Prescott filter on trend and difference stationary time series Implications for business cycle research," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 253-278. [Downloadable!] (restricted)
    Other versions:
  7. Andrew Levin & Volker Wieland & John C. Williams, 1998. "Robustness of Simple Monetary Policy Rules under Model Uncertainty," NBER Working Papers 6570, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. Robert J. Hodrick & Edward Prescott, 1981. "Post-War U.S. Business Cycles: An Empirical Investigation," Discussion Papers 451, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
    Other versions:
  9. Taylor, John B, 1979. "Estimation and Control of a Macroeconomic Model with Rational Expectations," Econometrica, Econometric Society, vol. 47(5), pages 1267-86, September. [Downloadable!] (restricted)
  10. Harvey, A C & Jaeger, A, 1993. "Detrending, Stylized Facts and the Business Cycle," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(3), pages 231-47, July-Sept. [Downloadable!] (restricted)
  11. Glenn D. Rudebusch & Lars E. O. Svensson, 1998. "Policy rules for inflation targeting," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
    Other versions:
  12. Isard, Peter & Laxton, Douglas & Eliasson, Ann-Charlotte, 2001. "Inflation targeting with NAIRU uncertainty and endogenous policy credibility," Journal of Economic Dynamics and Control, Elsevier, vol. 25(1-2), pages 115-148, January. [Downloadable!] (restricted)
    Other versions:
  13. Guay, A & St-Amant, P, 1996. "Do Mechanical Filters Provide a Good Approximation of Business Cycles?," Technical Reports 78, Bank of Canada. [Downloadable!]
    Other versions:
  14. Aaron Drew & Ben Hunt, 1998. "The Forecasting and Policy System: stochastic simulations of the core model," Reserve Bank of New Zealand Discussion Paper Series G98/6, Reserve Bank of New Zealand. [Downloadable!]
  15. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December. [Downloadable!] (restricted)
  16. Douglas Laxton & Guy Debelle, 1996. "Is the Phillips Curve Really a Curve? Some Evidence for Canada, the United Kingdom, and the United States," IMF Working Papers 96/111, International Monetary Fund.
  17. Jane T. Haltmaier, 1996. "Inflation-adjusted potential output," International Finance Discussion Papers 561, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  18. Andrew G. Haldane & Nicoletta Batini, 1998. "Forward-Looking Rules for Monetary Policy," NBER Working Papers 6543, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  19. Glenn D. Rudebusch, 2001. "Is The Fed Too Timid? Monetary Policy In An Uncertain World," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 203-217, May. [Downloadable!] (restricted)
    Other versions:
  20. Paul Conway & Ben Hunt, 1997. "Estimating potential output: a semi-structural approach," Reserve Bank of New Zealand Discussion Paper Series G97/9, Reserve Bank of New Zealand. [Downloadable!]
  21. Volker Wieland, 1998. "Monetary policy and uncertainty about the natural unemployment rate," Finance and Economics Discussion Series 1998-22, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
    Other versions:
  22. Buiter, Willem H, 1988. "Death, Birth, Productivity Growth and Debt Neutrality," Economic Journal, Royal Economic Society, vol. 98(391), pages 279-93, June. [Downloadable!] (restricted)
  23. P.A. Tinsley, 1993. "Fitting both data and theories: polynomial adjustment costs and error- correction decision rules," Finance and Economics Discussion Series 93-21, Board of Governors of the Federal Reserve System (U.S.).
  24. Weil, Philippe, 1989. "Overlapping families of infinitely-lived agents," Journal of Public Economics, Elsevier, vol. 38(2), pages 183-198, March. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, 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.)

  1. Aaron Drew & L Christopher Plantier, 2000. "Interest rate smoothing in New Zealand and other dollar bloc countries," Reserve Bank of New Zealand Discussion Paper Series DP2000/10, Reserve Bank of New Zealand. [Downloadable!]
  2. Victor Gaiduch & Benjamin Hunt, 2000. "Inflation targeting under potential output uncertainty," Reserve Bank of New Zealand Discussion Paper Series DP2000/08, Reserve Bank of New Zealand. [Downloadable!]
  3. Eric T. Swanson, 2000. "On signal extraction and non-certainty-equivalence in optimal monetary policy rules," Proceedings, Federal Reserve Bank of San Francisco. [Downloadable!]
    Other versions:
  4. Halim Alamsyah, Charles Joseph, Juda Agung, Doddy Zulverdy, 2001. "Towards Implementation Of Inflation Targeting In Indonesia," Bulletin of Indonesian Economic Studies, Taylor and Francis Journals, vol. 37(3), pages 309-324, December. [Downloadable!] (restricted)
  5. Aaron Drew & Viv Hall & John McDermott & Robert St. Clair, 2001. "Would adopting the Australian dollar provide superior monetary policy in New Zealand?," Reserve Bank of New Zealand Discussion Paper Series DP2001/03, Reserve Bank of New Zealand. [Downloadable!]
    Other versions:
  6. Aaron Drew & Benjamin Hunt, 2000. "A comparison of the properties of NZM and FPS," Reserve Bank of New Zealand Discussion Paper Series DP2000/02, Reserve Bank of New Zealand. [Downloadable!]
  7. Ferhat MIHOUBI & Pascal JACQUINOT, 2004. "The Optimality of the US and Euro Area Taylor Rule," Computing in Economics and Finance 2004 220, Society for Computational Economics. [Downloadable!]
  8. Michael Ehrmann & Frank Smets, 2001. "Uncertain potential output: implications for monetary policy," Working Paper Series 059, European Central Bank. [Downloadable!]
    Other versions:
  9. Ben Hunt & Douglas Laxton, 2001. "The Zero Interest Rate Floor (ZIF) and its Implications for Monetary Policy in Japan," IMF Working Papers 01/186, International Monetary Fund. [Downloadable!]
  10. Yuong Ha, 2000. "Uncertainty about the length of the monetary policy transmission lag: implications for monetary policy," Reserve Bank of New Zealand Discussion Paper Series DP2000/01, Reserve Bank of New Zealand. [Downloadable!]
  11. Paul Conway, 2000. "Monetary policy in an uncertain world," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 63, September. [Downloadable!]
  12. Robert Tetlow & Peter von zur Muehlen, 2004. "Avoiding Nash Inflation: Bayesian and Robus Responses to Model Uncertainty," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(4), pages 869-899, October. [Downloadable!] (restricted)
    Other versions:
  13. Keiko Honjo & Ben Hunt, 2006. "Stabilizing Inflation in Iceland," IMF Working Papers 06/262, International Monetary Fund. [Downloadable!]
  14. Martha Rosalba Lopezpiñeros, 2004. "Efficient Policy Rulefor Inflation Targeting Incolombia," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE. [Downloadable!]
    Other versions:
  15. Chris Plantier & Dean Scrimgeour, 2002. "The Taylor Rule and its relevance to New Zealand monetary policy," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 65, March. [Downloadable!]
  16. L Christopher Plantier & Dean Scrimgeour, 2002. "Estimating a Taylor Rule for New Zealand with a time-varying neutral real rate," Reserve Bank of New Zealand Discussion Paper Series DP2002/06, Reserve Bank of New Zealand. [Downloadable!]
  17. Juan Manuel Julio Román, . "The Monetary Policy Rule During The Transition To A Stable Level Of Inflation: The Case Of Colombia," Borradores de Economia 404, Banco de la Republica de Colombia. [Downloadable!]
    Other versions:
Statistics
Access and download statistics

Did you know? Over 80% of the top 1000 economists are registered on RePEc.

This page was last updated on 2009-11-1.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.