Learning and Loss Functions: Comparing Optimal and Operational Monetary Policy Rules
Modern Bayesian tools aided by MCMC techniques allow researchers to estimate models with increasingly intricate dynamics. This paper highlights the application of these tools with an empirical assessment of optimal versus operational monetary policy rules within a standard New Keynesian macroeconomic model with adaptive learning. The question of interest is which of the two policy rules - contemporaneous data or expectations of current variables - better describes the policy undertaken by the U.S. central bank. Results for the data period 1954:III to 2007:I indicate that the data strongly favors contemporaneous expectations over real time data.
|Date of creation:||12 Jul 2012|
|Date of revision:||14 Dec 2013|
|Contact details of provider:|| Postal: Ursinus College 601 East Main St. Collegeville, PA 19426|
Web page: http://webpages.ursinus.edu/ecba/
More information through EDIRC
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.:
- 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.
- 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.
- Bullard, James & Mitra, Kaushik, 2002.
"Learning about monetary policy rules,"
Journal of Monetary Economics,
Elsevier, vol. 49(6), pages 1105-1129, September.
- Eric Gaus, 2012.
"Robust Stability of Monetary Policy Rules under Adaptive Learning,"
13-01, Ursinus College, Department of Economics, revised 14 Dec 2012.
- Eric Gaus, 2013. "Robust Stability of Monetary Policy Rules under Adaptive Learning," Southern Economic Journal, Southern Economic Association, vol. 80(2), pages 439-453, October.
- John Duffy & Wei Xiao, 2007.
"The Value of Interest Rate Stabilization Policies When Agents Are Learning,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 39(8), pages 2041-2056, December.
- Duffy, John & Xiao, Wei, 2004. "The value of interest rate stabilization polices when agents are learning," Working Papers 2004-02, University of New Orleans, Department of Economics and Finance.
- Fabio Milani, 2005.
"Expectations, Learning and Macroeconomic Persistence,"
050608, University of California-Irvine, Department of Economics.
- Milani, Fabio, 2007. "Expectations, learning and macroeconomic persistence," Journal of Monetary Economics, Elsevier, vol. 54(7), pages 2065-2082, October.
- Fabio Milani, 2005. "Expectations, Learning and Macroeconomic Persistence," Macroeconomics 0510022, EconWPA.
When requesting a correction, please mention this item's handle: RePEc:urs:urswps:14-01. 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: (Eric Gaus)
If references are entirely missing, you can add them using this form.