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.
| Author: | Andrew Levin, Volker WielandORCiDGND, John C. Williams |
|---|---|
| URN: | urn:nbn:de:hebis:30-10130 |
| Parent Title (German): | Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2003,06 |
| Series (Serial Number): | CFS working paper series (2003, 06) |
| Document Type: | Working Paper |
| Language: | English |
| Year of Completion: | 2003 |
| Year of first Publication: | 2003 |
| Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Release Date: | 2005/06/13 |
| Tag: | inflation forecast targeting; optimal monetary policy |
| GND Keyword: | Geldpolitik |
| HeBIS-PPN: | 203802853 |
| Institutes: | Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) |
| Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| Licence (German): |  Deutsches Urheberrecht |
