Uncertainty and Multiple Paradigms of the Transmission Mechanism
An important challenge facing central banks is making decisions under uncertainty about the dynamic effects of monetary policy actions. The authors stress the importance of explicitly recognizing uncertainty about the transmission mechanism when formulating policy advice. They argue that one way to manage monetary policy under uncertainty is to draw on both an output-gap paradigm and a money paradigm of the transmission mechanism to inform decision-making. Taking an eclectic, diversified approach to guide policy judgements could improve the policy outcome.
|Date of creation:||1998|
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References listed on IDEAS
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- David E. Laidler, 1988.
"Taking Money Seriously,"
Canadian Journal of Economics,
Canadian Economics Association, vol. 21(4), pages 687-713, November.
- St-Amant, P. & van Norden, S., 1997. "Measurement of the Output Gap: A Discussion of Recent Research at the Bank of Canada," Technical Reports 79, Bank of Canada.
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- Ben S.C. Fung & Marcel Kasumovich, 1997.
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Staff Working Papers
97-7, Bank of Canada.
- Fung, Ben Siu-cheong & Kasumovich, Marcel, 1998. "Monetary shocks in the G-6 countries: Is there a puzzle?," Journal of Monetary Economics, Elsevier, vol. 42(3), pages 575-592, October.
- Charles Freedman, 1995. "The role of monetary conditions and the monetary conditions index in the conduct of policy [speech]," Bank of Canada Review, Bank of Canada, vol. 1995(Autumn), pages 53-59.
- Engert, Walter & Hendry, Scott, 1998. "Forecasting Inflation with the M1-VECM: Part Two," Staff Working Papers 98-6, Bank of Canada.
- Scott Hendry, 1995. "Long-Run Demand for M1," Macroeconomics 9511001, EconWPA.
- Bennett T. McCallum, 1996. "Inflation Targeting in Canada, New Zealand, Sweden, the United Kingdom, and in General," NBER Working Papers 5579, National Bureau of Economic Research, Inc.
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