Robustly optimal monetary policy with near-rational expectations
- The paper considers optimal monetary stabilization policy in a forward-looking model, when the central bank recognizes that private-sector expectations need not be precisely model-consistent, and wishes to choose a policy that will be as good as possible in the case of any beliefs that are close enough to model-consistency. It is found that commitment continues to be important for optimal policy, that the optimal long-run inflation target is unaffected by the degree of potential distortion of beliefs, and that optimal policy is even more history-dependent than if rational expectations are assumed. JEL Classification: E52, E58, E42
Author: | Michael Woodford |
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URN: | urn:nbn:de:hebis:30-38229 |
Parent Title (German): | Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2007,12 |
Series (Serial Number): | CFS working paper series (2007, 12) |
Document Type: | Working Paper |
Language: | English |
Year of Completion: | 2005 |
Year of first Publication: | 2005 |
Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
Release Date: | 2007/02/23 |
Tag: | Commitment; History-Dependent Policy; Optimal Monetary Policy |
GND Keyword: | Geldpolitik |
Issue: | December 13, 2005 |
Page Number: | 50 |
HeBIS-PPN: | 190113529 |
Institutes: | Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) |
Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
Licence (German): | Deutsches Urheberrecht |