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Revisiting the role of multiplicative uncertainty in a model without inflationary bias

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  • Giuseppe Ciccarone
  • Enrico Marchetti

Abstract

Kobayashi (2003) aims to show that, in a model without inflationary bias, an increase in the degree of multiplicative uncertainty on the transmission mechanism of monetary policy improves social welfare when central bank’s preferences are highly uncertain. We demonstrate that this result applies only to the case in which society is strictly conservative, i.e., when the weight attached to output in the social welfare function is lower than one.

Suggested Citation

  • Giuseppe Ciccarone & Enrico Marchetti, 2008. "Revisiting the role of multiplicative uncertainty in a model without inflationary bias," Working Papers in Public Economics 110, University of Rome La Sapienza, Department of Economics and Law.
    • Handle: RePEc:sap:wpaper:wp110
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    References listed on IDEAS

    as
    1. Muscatelli, Anton, 1998. "Optimal Inflation Contracts and Inflation Targets with Uncertain Central Bank Preferences: Accountability through Independence?," Economic Journal, Royal Economic Society, vol. 108(447), pages 529-542, March.
    2. Kobayashi, Teruyoshi, 2003. "Multiplicative uncertainty in a model without inflationary bias," Economics Letters, Elsevier, vol. 80(3), pages 317-321, September.
    3. Giuseppe Ciccarone & Enrico Marchetti & Giovanni Di Bartolomeo, 2007. "Unions, Fiscal Policy And Central Bank Transparency," Manchester School, University of Manchester, vol. 75(5), pages 617-633, September.
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    Cited by:

    1. Olga S. Kuznetsova & Sergey A. Merzlyakov, 2015. "The Role of Uncertain Government Preferences For Fiscal and Monetary Policy Interaction," HSE Working papers WP BRP 102/EC/2015, National Research University Higher School of Economics.
    2. Giuseppe Ciccarone & Enrico Marchetti, 2012. "Optimal linear contracts under common agency and uncertain central bank preferences," Public Choice, Springer, vol. 150(1), pages 263-282, January.
    3. Meixing Dai, 2016. "Static And Dynamic Effects Of Central Bank Transparency," Bulletin of Economic Research, Wiley Blackwell, vol. 68(1), pages 55-78, January.
    4. Meixing Dai & Qiao Zhang, 2013. "Central bank transparency with the cost channel," Working Papers of BETA 2013-06, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    5. Meixing Dai & Moïse Sidiropoulos, 2017. "How multiplicative uncertainty affects the tradeoff between information disclosure and stabilisation policy?," Working Papers of BETA 2017-15, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    6. Meixing Dai, 2010. "Multiplicative uncertainty, central bank transparency and optimal degree of conservativeness," Economics Bulletin, AccessEcon, vol. 30(3), pages 1720-1726.
    7. Ciccarone, Giuseppe & Giuli, Francesco & Marchetti, Enrico, 2019. "Macroeconomic equilibrium and nominal price rigidities under imperfect rationality," Journal of Macroeconomics, Elsevier, vol. 60(C), pages 60-78.

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    More about this item

    Keywords

    Multiplicative uncertainty; Brainard conservatism; Uncertain preferences; Monetary policy.;
    All these keywords.

    JEL classification:

    • 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

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