Advanced Search
MyIDEAS: Login to save this paper or follow this series

The science of monetary policy: A new Keynesian perspective

Contents:

Author Info

  • Richard Clarida
  • Jordi Galí

    ()

  • Mark Gertler

Abstract

This paper reviews the recent literature on monetary policy rules. We exposit the monetary policy design problem within a simple baseline theoretical framework. We then consider the implications of adding various real world complications. Among other things, we show that the optimal policy implicitly incorporates inflation targeting. We also characterize the gains from making credible commitments to fight inflation. In contrast to conventional wisdom, we show that gains from commitment may emerge even in the central bank is not trying to inadvisedly push output above its natural level. We also consider the implications of frictions such as imperfect information.

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.upf.edu/docs/papers/downloads/356.pdf
File Function: Whole Paper
Download Restriction: no

Bibliographic Info

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 356.

as in new window
Length:
Date of creation: Sep 1997
Date of revision: Apr 1999
Handle: RePEc:upf:upfgen:356

Contact details of provider:
Web page: http://www.econ.upf.edu/

Related research

Keywords: Monetary policy; credibility; stabilization; new keynesian models;

Other versions of this item:

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. Teruyoshi Kobayashi, 2005. "Optimal monetary policy and the role of hybrid inflation-price-level targets," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 37(18), pages 2119-2125.
  2. Dufour, Jean-Marie & Khalaf, Lynda & Kichian, Maral, 2013. "Identification-robust analysis of DSGE and structural macroeconomic models," Journal of Monetary Economics, Elsevier, Elsevier, vol. 60(3), pages 340-350.
  3. N. Gregory Mankiw, 2006. "The Macroeconomist as Scientist and Engineer," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 2121, Harvard - Institute of Economic Research.
  4. Junhan Kim, 2011. "Inflation Targeting as Constrained Discretion," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 43(7), pages 1505-1522, October.
  5. Ben S. Bernanke & Jean Boivin, 2001. "Monetary Policy in a Data-Rich Environment," NBER Working Papers 8379, National Bureau of Economic Research, Inc.
  6. Leitemo, Kai & Söderström , Ulf, 2004. "Robust monetary policy in the New-Keynesian framework," Research Discussion Papers, Bank of Finland 31/2004, Bank of Finland.
  7. Tatiana Damjanovic & Vladislav Damjanovic & Charles Nolan, 2007. "Unconditionally Optimal Monetary Policy," CDMA Working Paper Series, Centre for Dynamic Macroeconomic Analysis 200721, Centre for Dynamic Macroeconomic Analysis.
  8. Christopher J. Erceg & Andrew T. Levin, 2001. "Imperfect credibility and inflation persistence," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2001-45, Board of Governors of the Federal Reserve System (U.S.).
  9. Traficante, Guido, 2013. "Monetary policy, parameter uncertainty and welfare," Journal of Macroeconomics, Elsevier, Elsevier, vol. 35(C), pages 73-80.
  10. Gauti B. Eggertsson, 2008. "Great Expectations and the End of the Depression," American Economic Review, American Economic Association, American Economic Association, vol. 98(4), pages 1476-1516, September.
  11. Montserrat Ferré, 2005. "Should Fiscal Authorities Co-operate in a Monetary Union with Public Deficit Targets?," Journal of Common Market Studies, Wiley Blackwell, Wiley Blackwell, vol. 43(3), pages 539-550, 09.
  12. Stefan Krause, 2006. "Optimal monetary policy and the equivalency between the one-period AD-AS model and the forward-looking New Keynesian model," Applied Economics Letters, Taylor & Francis Journals, Taylor & Francis Journals, vol. 13(9), pages 541-544.
  13. Mahir Binici & Yin-Wong Cheung, 2011. "Exchange Rate Dynamics under Alternative Optimal Interest Rate Rules," Working Papers 1116, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  14. Shouyong Shi, 2006. "A Microfoundation of Monetary Economics," Working Papers tecipa-211, University of Toronto, Department of Economics.
  15. Pavel Kapinos & Michael S. Hanson, 2013. "Targets In The Taylor Rule: Inflation, Speed Limit, Or Price Level?," Contemporary Economic Policy, Western Economic Association International, vol. 31(1), pages 176-190, 01.
  16. Bils, Mark & Chang, Yongsung, 2003. "Welfare costs of sticky wages when effort can respond," Journal of Monetary Economics, Elsevier, Elsevier, vol. 50(2), pages 311-330, March.
  17. Allen Head & Lucy Qian Liu & Guido Menzio & Randall Wright, 2011. "Sticky Prices: A New Monetarist Approach," NBER Working Papers 17520, National Bureau of Economic Research, Inc.
  18. Paez-Farrell, Juan, 2012. "Should central bankers discount the future? A note," Economics Letters, Elsevier, Elsevier, vol. 114(1), pages 20-22.
  19. Jensen, Christian, 2013. "The gains from short-term commitments," Journal of Macroeconomics, Elsevier, Elsevier, vol. 35(C), pages 14-23.
  20. Peter Tillmann, 2012. "Has Inflation Persistence Changed under EMU?," German Economic Review, Verein für Socialpolitik, Verein für Socialpolitik, vol. 13(1), pages 86-102, 02.
  21. Waltraud Schelkle & Anke Hassel, 2012. "The Policy Consensus Ruling European Political Economy: The Political Attractions of Discredited Economics," Global Policy, London School of Economics and Political Science, London School of Economics and Political Science, vol. 3, pages 16-27, December.
Full references (including those not matched with items on IDEAS)

Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Manuel Arellano recibe el premio Jaime I de Economía.
    by Cives in Politikon on 2012-06-05 17:13:35
  2. Could the Shadow Open Market Committee have outperfomed the Fed?
    by Economic Logician in Economic Logic on 2011-05-10 13:51:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is featured on the following reading lists or Wikipedia pages:
  1. Nueva Economía Keynesiana in Wikipedia Spanish ne '')
  2. Economic Logic blog

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:upf:upfgen:356. 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: ().

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.