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 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. Klassifikation: E31, E52, E58, E61
| Author: | Andrew Levin, Volker Wieland, John C. Williams |
|---|---|
| URN: | urn:nbn:de:hebis:30-10130 |
| Series (Serial Number) | CFS working paper series (2003, 06) |
| Document Type: | Working Paper |
| Language: | English |
| Date of Publication (online): | 13.06.2005 |
| Year of first Publication: | 2003 |
| Publishing Institution: | Univ.-Bibliothek Frankfurt am Main |
| 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 |
| Sammlungen: | Universitätspublikationen |
| Licence (German): |  Veröffentlichungsvertrag für Publikationen ohne Print on Demand |
