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Monetary policy in an uncertain environment

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  • Martin Feldstein

Abstract

This paper discusses the nature of the uncertainty faced by central banks and considers three approaches to dealing with uncertainty(1) formal optimization models and robust rules based on such models; (2) informal rules like the Taylor rule and inflation targeting; and (3) a case by case approach based on an informal Bayesian logic. The latter case requires considering the asymmetric nature of the risks that the central bank often faces.
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Suggested Citation

  • Martin Feldstein, 2003. "Monetary policy in an uncertain environment," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 373-382.
  • Handle: RePEc:fip:fedkpr:y:2003:p:373-382
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    File URL: http://www.kansascityfed.org/Publicat/sympos/2003/pdf/Feldstein.0910.2003.pdf
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    References listed on IDEAS

    as
    1. Alan Greenspan, 1996. "Opening remarks," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 1-5.
    2. Carl E. Walsh, 2003. "Implications of a changing economic structure for the strategy of monetary policy," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 297-348.
    3. Malcolm D. Knight, 2003. "Implications of a changing economic structure for the strategy of monetary policy," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 361-371.
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    Cited by:

    1. van der Ploeg, Frederick, 2004. "Prudent Monetary Policy: Applications of Cautious LQG Control and Prediction," CEPR Discussion Papers 4222, C.E.P.R. Discussion Papers.
    2. Frederick van der Ploeg, 2007. "Prudent Monetary Policy and Cautious Prediction of the Output Gap," Economics Working Papers ECO2007/40, European University Institute.
    3. Felipe Morandé & Mauricio Tejada, 2008. "Sources of Uncertainty for Conducting Monetary Policy in Chile," Working Papers Central Bank of Chile 492, Central Bank of Chile.
    4. Cagé, Julia, 2009. "Growth, Poverty Reduction and Governance in Developing Countries: a Survey," CEPREMAP Working Papers (Docweb) 0904, CEPREMAP.
    5. Emiliano Basco & Tomás Castagnino & Sebastián Katz & Sebastián Vargas (ed.), 2007. "Monetary Policy Under Uncertainty, Regime Change and High Volatility," BCRA Paper Series, Central Bank of Argentina, Economic Research Department, number 04, November.
    6. van der Ploeg, Frederick, 2009. "Prudent monetary policy and prediction of the output gap," Journal of Macroeconomics, Elsevier, vol. 31(2), pages 217-230, June.
    7. Emiliano Basco & Tomás Castagnino & Sebastián Katz & Sebastián Vargas, 2007. "Monetary Policy Under Uncertainty, Regime Change and High Volatility," BCRA Working Paper Series 200725, Central Bank of Argentina, Economic Research Department.
    8. Felipe Morandé L. & Mauricio Tejada G., 2008. "Sources of Uncertainty in Monetary Policy Conduct in Chile," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 11(3), pages 45-80, December.

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    More about this item

    Keywords

    Uncertainty; Monetary policy;

    JEL classification:

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

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