How Conservative Does the Central Banker Have to Be? On the Treatment of Expectations under Discretionary Policymaking
This paper explores an issue that arises in the delegation process. The paper shows that a myopic central banker, one who treats expectations as constant in setting discretionary policy, can replicate the behavior of output and inflation under policy from a timeless perspective. For that to happen, society must delegate a price level target or a speed limit policy to a central banker who is more weight-conservative than society.
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- McCallum, Bennett T & Nelson, Edward, 2001.
"Timeless Perspective Vs Discretionary Monetary Policy in Forward-Looking Models,"
CEPR Discussion Papers
2752, C.E.P.R. Discussion Papers.
- Bennett T. McCallum & Edward Nelson, 2004. "Timeless perspective vs. discretionary monetary policy in forward-looking models," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 43-56.
- Bennett T. McCallum & Edward Nelson, 2000. "Timeless Perspectives vs. Discretionary Monetary Policy In Forward-Looking Models," NBER Working Papers 7915, National Bureau of Economic Research, Inc.
- Vestin, David, 2000. "Price-level Targeting versus Inflation Targeting in a Forward-looking Model," Working Paper Series 106, Sveriges Riksbank (Central Bank of Sweden).
- Henrik Jensen, 2002.
"Targeting Nominal Income Growth or Inflation?,"
American Economic Review,
American Economic Association, vol. 92(4), pages 928-956, September.
- Jensen, Henrik, 1999. "Targeting Nominal Income Growth or Inflation?," CEPR Discussion Papers 2341, C.E.P.R. Discussion Papers.
- Henrik Jensen, . "Targeting Nominal Income Growth or Inflation?," EPRU Working Paper Series 99-23, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
- McCallum, Bennett T., 1983.
"On non-uniqueness in rational expectations models : An attempt at perspective,"
Journal of Monetary Economics,
Elsevier, vol. 11(2), pages 139-168.
- Bennett T. McCallum, 1981. "On Non-Uniqueness in Rational Expectations Models: An Attempt at Perspective," NBER Working Papers 0684, National Bureau of Economic Research, Inc.
- Froyen, Richard T. & Guender, Alfred V., 2014. "Price level targeting and the delegation issue in an open economy," Economics Letters, Elsevier, vol. 122(1), pages 12-15.
- Michael Woodford, 1999. "Commentary : how should monetary policy be conducted in an era of price stability?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 277-316.
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