Optimal monetary policy in a model of overlapping price contracts
This study estimates a model of overlapping nominal price contracts over three distinct monetary policy regimes, testing the stability of the parameters in the model across regimes. Upon finding a model that is stable over the three subsamples, the model then holds for the most recent monetary regime is used to compute the optimal policy frontier - the efficient combinations of output and inflation variances - and compared to actual policy performance. The study then evaluates the robustness of policy conclusions to particulars of the specification, and discusses the general properties that are required of a model in order to produce a plausible estimate of the optimal policy frontier.
|Date of creation:||1994|
|Date of revision:|
|Publication status:||Published in Journal of Money, Credit and Banking 29, no. 2 (May 1997): 214-34.|
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Web page: http://www.bos.frb.org/
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- Anderson, Gary & Moore, George, 1985. "A linear algebraic procedure for solving linear perfect foresight models," Economics Letters, Elsevier, vol. 17(3), pages 247-252.
- Jeff Fuhrer & George Moore, 1993.
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Federal Reserve Bank of San Francisco, issue Mar.
- Jeffrey C. Fuhrer, 1995. "Monetary policy and the behavior of long-term real interest rates," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 39-52.
- Jeff Fuhrer & George Moore, 1993. "Monetary policy and the behavior of long-term real interest rates," Finance and Economics Discussion Series 93-16, Board of Governors of the Federal Reserve System (U.S.).
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89, Board of Governors of the Federal Reserve System (U.S.).
- Fuhrer, Jeff & Moore, George, 1992. "Monetary policy rules and the indicator properties of asset prices," Journal of Monetary Economics, Elsevier, vol. 29(2), pages 303-336, April.
- Fuhrer, Jeffrey C. & Hooker, Mark A., 1993.
"Learning about monetary regime shifts in an overlapping wage contract model,"
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Elsevier, vol. 17(4), pages 531-553, July.
- Jeffrey C. Fuhrer & Mark A. Hooker, 1988. "Learning about monetary regime shifts in an overlapping wage contract model," Finance and Economics Discussion Series 25, Board of Governors of the Federal Reserve System (U.S.).
- Taylor, John B, 1979. "Estimation and Control of a Macroeconomic Model with Rational Expectations," Econometrica, Econometric Society, vol. 47(5), pages 1267-86, September.
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The Quarterly Journal of Economics,
MIT Press, vol. 110(1), pages 127-59, February.
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