IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Optimal Monetary Policy with an Uncertain Cost Channel

  • PETER TILLMANN

The cost channel of monetary transmission describes a supply-side effect of interest rates on firms' costs. Previous research has found this effect to vary, both over time and across countries. Moreover, the cyclical nature of financial frictions is likely to amplify the cost channel. This paper derives optimal monetary policy in the presence of uncertainty about the true size of the cost channel. In a min-max approach, the central bank derives an optimal policy plan to be implemented by a Taylor rule. It is shown that uncertainty about the cost channel leads to an attenuated interest rate setting behavior. In this respect, the Brainard (1967) principle of cautious policy in the face of uncertainty continues to hold in both a Bayesian and a min-max framework. Copyright (c) 2009 The Ohio State University.

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.blackwell-synergy.com/doi/abs/10.1111/j.1538-4616.2009.00237.x
File Function: link to full text
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 41 (2009)
Issue (Month): 5 (08)
Pages: 885-906

as
in new window

Handle: RePEc:mcb:jmoncb:v:41:y:2009:i:5:p:885-906
Contact details of provider: Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:mcb:jmoncb:v:41:y:2009:i:5:p:885-906. 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: (Wiley-Blackwell Digital Licensing)

or (Christopher F. Baum)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.