The Phillips Curve and Optimal Policy in a Structural Signal Extraction Model
We study a monetary economy subject to "signal extraction" problems, and investigate within that framework the positive and normative aspects of monetary policy. As in Lucas (1972, 1973), imperfect signal perception generates macroeconomic correlations similar to those found in the "Phillips curve" literature. Moving to normative aspects, we find that, when aggregate shocks are present, traditional nonactivist policies do not allow to reach the first best, and that an intelligent activist policy always leads to better outcomes. The specific characteristics and effectiveness of this optimal policy also depend crucially on the problem of signal extraction. (Copyright: Elsevier)
Volume (Year): 4 (2001)
Issue (Month): 1 (January)
|Contact details of provider:|| Postal: Marina Azzimonti, Department of Economics, Stonybrook University, 10 Nicolls Road, Stonybrook NY 11790 USA|
Web page: http://www.EconomicDynamics.org/red/
More information through EDIRC
|Order Information:|| Web: https://www.economicdynamics.org/subscription-information/ Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Polemarchakis, H. M. & Weiss, L., 1977. "On the desirability of a "totally random" monetary policy," Journal of Economic Theory, Elsevier, vol. 15(2), pages 345-350, August.
- Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467-467.
- Sargent, Thomas J & Wallace, Neil, 1975. ""Rational" Expectations, the Optimal Monetary Instrument, and the Optimal Money Supply Rule," Journal of Political Economy, University of Chicago Press, vol. 83(2), pages 241-254, April.
- Lucas, Robert E, Jr, 1973. "Some International Evidence on Output-Inflation Tradeoffs," American Economic Review, American Economic Association, vol. 63(3), pages 326-334, June.
- Bulow, J & Polemarchakis, H M, 1983. "Retroactive Money," Economica, London School of Economics and Political Science, vol. 50(199), pages 301-310, August.
- Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
- Sargent, Thomas J & Wallace, Neil, 1982. "The Real-Bills Doctrine versus the Quantity Theory: A Reconsideration," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1212-1236, December.
When requesting a correction, please mention this item's handle: RePEc:red:issued:v:4:y:2001:i:1:p:58-74. 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: (Christian Zimmermann)
If references are entirely missing, you can add them using this form.