Money in monetary policy design under uncertainty: a formal characterization of ECB-style cross-checking

The European Central Bank has assigned a special role to money in its two pillar strategy and has received much criticism for this decision. The case against including money in the central bank’s interest rate rule is ba
The European Central Bank has assigned a special role to money in its two pillar strategy and has received much criticism for this decision. The case against including money in the central bank’s interest rate rule is based on a standard model of the monetary transmission process that underlies many contributions to research on monetary policy in the last two decades. In this paper, we develop a justification for including money in the interest rate rule by allowing for imperfect knowledge regarding unobservables such as potential output and equilibrium interest rates. We formulate a novel characterization of ECB-style monetary cross-checking and show that it can generate substantial stabilization benefits in the event of persistent policy misperceptions regarding potential output. JEL Classification: E32, E41, E43, E52, E58
show moreshow less

Download full text files

Export metadata

  • Export Bibtex
  • Export RIS

Additional Services

    Share in Twitter Search Google Scholar
Metadaten
Author:Günter W. Beck, Volker Wieland
URN:urn:nbn:de:hebis:30-43991
Series (Serial Number):CFS working paper series (2007, 18)
Document Type:Working Paper
Language:English
Date of Publication (online):2007/04/30
Year of first Publication:2007
Publishing Institution:Univ.-Bibliothek Frankfurt am Main
Release Date:2007/04/30
Tag:European Central Bank ; Phillips Curve ; monetary policy ; money ; policy under uncertainty; quantity theory
Note:
1st version: August 26, 2006 ; This version: September 15, 2006
HeBIS PPN:187516642
Institutes:Center for Financial Studies (CFS)
Dewey Decimal Classification:330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

$Rev: 11761 $