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Optimal Time-Invariant Monetary Policy

Author

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  • Charles Brendon

Abstract

This paper investigates how best to determine time-invariant policy rules in macroeconomic models with forward-looking constraints, where fully optimal policy is known to be time-inconsistent. It proposes a new 'coefficient optimisation' approach that improves upon the timeless perspective method of Woodford (2003) in deterministic problems, and on average in stochastic problems, without resorting to asymptotic ('unconditional') loss comparisons.

Suggested Citation

  • Charles Brendon, 2009. "Optimal Time-Invariant Monetary Policy," Economics Series Working Papers 463, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:wpaper:463
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    File URL: https://ora.ox.ac.uk/objects/uuid:56039219-0b89-4abb-a688-d5f96ccd010a
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    More about this item

    Keywords

    Timeless perspective; Time consistency; Optimal monetary policy; Time-invariant policy;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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