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Inflation inertia and optimal delegation of monetary policy

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  • Keiichi Morimoto

    (Department of Economics, Meisei University)

Abstract

This paper analyzes the relationship between the optimal weight on output gap in the central bank's loss function and the degree of inertia in a hybrid version of New Keynesian model with a pure discretionary inflation targeting. I show that under endogenous persistence of inflation dynamics, even in discretionary monetary policy regime, a Rogoff's (1985) conservative central banker does not necessarily improve social welfare.

Suggested Citation

  • Keiichi Morimoto, 2011. "Inflation inertia and optimal delegation of monetary policy," Economics Bulletin, AccessEcon, vol. 31(2), pages 1114-1124.
    • Handle: RePEc:ebl:ecbull:eb-11-00073
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    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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