Anticipated and unanticipated oil price shocks and optimal monetary policy
AbstractThis 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 InfoPaper provided by Christian-Albrechts-University of Kiel, Department of Economics in its series Economics Working Papers with number 2008,05.
Date of creation: 2008
Date of revision:
Anticipated Shocks; Oil Price Shocks; Open Economy; Optimal Monetary Policy; Simple Policy Rules;
Find related papers by JEL classification:
- 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
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-04-04 (All new papers)
- NEP-CBA-2008-04-04 (Central Banking)
- NEP-MAC-2008-04-04 (Macroeconomics)
- NEP-MON-2008-04-04 (Monetary Economics)
- NEP-OPM-2008-04-04 (Open Economy Macroeconomic)
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- 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.
- 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.
- Wohltmann, Hans-Werner & Winkler, Roland C., 2008. "On the Non-Optimality of Information: An Analysis of the Welfare Effects of Anticipated Shocks in the New Keynesian Model," Economics Working Papers 2008,21, Christian-Albrechts-University of Kiel, Department of Economics.
- 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.
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