The gains from delegation revisited: price-level targeting, speed-limit and interest rate smoothing policies
A commonly held view is that the life of a monetary policy maker forced to operate under discretion can be improved by the authorities delegating monetary policy objectives that are different from the social welfare function (including interest rate smoothing, price-level targeting and speed-limit objectives). We show that this holds with much less generality than previously realised. The reason is that in monetary policy models with capital accumulation (or similar variables) there may be multiple equilibria under discretion. Delegating modified objectives to the monetary policy maker does not change this. We find that the best equilbria under delegation are sometimes inferior to the worse ones without delegation. In general the welfare benefits of schemes like price-level targeting must be regarded as ambiguous.
|Date of creation:||15 Mar 2011|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +44 (0)171 601 4030
Fax: +44 (0)171 601 5196
Web page: http://www.bankofengland.co.uk/Email:
More information through EDIRC
References listed on IDEAS
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.:
- de Zeeuw, A J & van der Ploeg, F, 1991.
"Difference Games and Policy Evaluation: A Conceptual Framework,"
Oxford Economic Papers,
Oxford University Press, vol. 43(4), pages 612-36, October.
- de Zeeuw, A.J. & van der Ploeg, F., 1987. "Difference games and policy evaluation : A conceptual framework," Research Memorandum FEW 268, School of Economics and Management.
- repec:ner:tilbur:urn:nbn:nl:ui:12-377519 is not listed on IDEAS
When requesting a correction, please mention this item's handle: RePEc:boe:boeewp:0415. 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: (Publications Team)
If references are entirely missing, you can add them using this form.