The performance of forecast-based monetary policy rules under model uncertainty

We investigate the performance of forecast-based monetary policy rules using five macroeconomic models that reflect a wide range of views on aggregate dynamics. We identify the key characteristics of rules that are robus
We investigate the performance of forecast-based monetary policy rules using five macroeconomic models that reflect a wide range of views on aggregate dynamics. We identify the key characteristics of rules that are robust to model uncertainty: such rules respond to the one-year-ahead inflation forecast and to the current output gap and incorporate a substantial degree of policy inertia. In contrast, rules with longer forecast horizons are less robust and are prone to generating indeterminacy. Finally, we identify a robust benchmark rule that performs very well in all five models over a wide range of policy preferences.
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Metadaten
Author:Andrew Levin, Volker Wieland, John C. Williams
URN:urn:nbn:de:hebis:30-10130
Parent Title (German):CFS working paper series ; 2003, 06
Series (Serial Number):CFS working paper series (2003, 06)
Document Type:Working Paper
Language:English
Date of Publication (online):2005/06/13
Year of first Publication:2003
Publishing Institution:Univ.-Bibliothek Frankfurt am Main
Release Date:2005/06/13
Tag:inflation forecast targeting ; optimal monetary policy
Source:CFS working paper ; 2003,06
HeBIS PPN:203802853
Institutes:Center for Financial Studies (CFS)
Dewey Decimal Classification:330 Wirtschaft
JEL-Classification:E31 Price Level; Inflation; Deflation
E52 Monetary Policy
E58 Central Banks and Their Policies
E61 Policy Objectives; Policy Designs and Consistency; Policy Coordination
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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