Advanced Search
MyIDEAS: Login

Implementing Optimal Monetary Policy in New-Keynesian Models with Inertia

Contents:

Author Info

  • George W. Evans

    ()
    (University of Oregon Economics Department)

  • Bruce McGough

    (Oregon State University)

Abstract

We consider optimal monetary policy in New Keynesian models with inertia. First order conditions, which we call the MJB-alternative, are found to improve upon the timeless perspective. The MJB-alternative is shown to be the best possible in the sense that it minimizes policymakers' unconditional expected loss, and further, it is numerically found to offer significant improvement over the timeless perspective. Implementation of the MJB-alternative is considered via construction of interest-rate rules that are consistent with its associated unique equilibrium. Following Evans and Honkapohja (2004), an expectations based rule is derived that always yields a determinate model and an E-stable equilibrium. Further, the "policy manifold" of all interest-rate rules consistent with the MJB-alternative is classified, and open regions of this manifold are shown to correspond to indeterminate models and unstable equilibria.

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://economics.uoregon.edu/papers/UO-2006-5_Evans_Implementing.pdf
Download Restriction: no

Bibliographic Info

Paper provided by University of Oregon Economics Department in its series University of Oregon Economics Department Working Papers with number 2006-5.

as in new window
Length: 36
Date of creation: 03 Jun 2006
Date of revision:
Handle: RePEc:ore:uoecwp:2006-5

Contact details of provider:
Postal: 1285 University of Oregon, 435 PLC, Eugene, OR 97403-1285
Phone: (541) 346-4661
Fax: (541) 346-1243
Email:
Web page: http://economics.uoregon.edu/
More information through EDIRC

Related research

Keywords: Monetary Policy; Taylor Rules; Indeterminacy; E-stability;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. George Waters, 2011. "Dangers of commitment under rational expectations," Journal of Economics and Finance, Springer, vol. 35(4), pages 371-381, October.
  2. McGough, Bruce & Meng, Qinglai & Xue, Jianpo, 2013. "Expectational stability of sunspot equilibria in non-convex economies," Journal of Economic Dynamics and Control, Elsevier, vol. 37(6), pages 1126-1141.

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:ore:uoecwp:2006-5. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bill Harbaugh).

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.