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Anticipated and unanticipated oil price shocks and optimal monetary policy

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  • Wohltmann, Hans-Werner
  • Winkler, Roland C.

Abstract

This paper studies the welfare effects of severalmonetary policy rules in the presence of anticipated and unanticipated oil price shocks. Our analysis is based on a stylized New Keynesian model of a small open economy. Our main findings are the following: i) Standard interest rate rules amplify the welfare loss compared to neutral monetary policies. ii) The optimal policy under commitment, by contrast, dampens the welfare loss. iii) Optimized simple rules can replicate the outcome under the optimal unrestricted rule if they are history-dependent, contain the exchange rate and, in the anticipated case, forward-looking elements. iv) Anticipated oil shocks lead to a higher welfare loss than unanticipated shocks. --

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Bibliographic Info

Paper provided by Christian-Albrechts-University of Kiel, Department of Economics in its series Economics Working Papers with number 2008,05.

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Date of creation: 2008
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Handle: RePEc:zbw:cauewp:7112

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Related research

Keywords: Anticipated Shocks; Oil Price Shocks; Open Economy; Optimal Monetary Policy; Simple Policy Rules;

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Cited by:
  1. Hans-Werner Wohltmann & Roland Winkler, 2009. "On the Non-Optimality of Information: An Analysis of the Welfare Effects of Anticipated Shocks in the New Keynesian Model," Kiel Working Papers 1497, Kiel Institute for the World Economy.
  2. Sacht, Stephen, 2014. "Optimal monetary policy responses and welfare analysis within the highfrequency New-Keynesian framework," Economics Working Papers 2014-03, Christian-Albrechts-University of Kiel, Department of Economics.
  3. Siok Kun, Sek, 2009. "The impacts of economic structures on the performance of simple policy rules in a small open economy," MPRA Paper 25065, University Library of Munich, Germany.

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