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How square is the policy frontier ?

Author

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  • Henry, Brian

    (University of Oxford)

  • Mathan Satchi
  • David Vines

Abstract

This paper assesses the implications of discounting on a result derived by Bean (1998): that in a model of monetary policy where policy acts with a lag, the outcomes of monetary policy are very similar for a wide range of weightings of the (non-discounting) monetary authority's objective function, with respect to inflation stability versus output stability. We show that when the authority discounts the future, outcomes become more sensitive to preferences, and that it is important to take the discount rate into account when examining the question of how the authority's remit should be specified.

Suggested Citation

  • Henry, Brian & Mathan Satchi & David Vines, 2002. "How square is the policy frontier ?," Royal Economic Society Annual Conference 2002 100, Royal Economic Society.
    • Handle: RePEc:ecj:ac2002:100
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    Cited by:

    1. SGB Henry & Mathan Satchi & David Vines, 2006. "The Effect of Discounting on Policy Choices in Inflation Targeting Regimes," Economic Journal, Royal Economic Society, vol. 116(508), pages 266-282, January.

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