Latest documents http://publikationen.ub.uni-frankfurt.de/index/index/ Mon, 09 May 2005 16:35:05 +0200 Mon, 09 May 2005 16:35:05 +0200 http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/4056 Under a conventional policy rule, a central bank adjusts its policy rate linearly according to the gap between inflation and its target, and the gap between output and its potential. Under "the opportunistic approach to disinflation" a central bank controls inflation aggressively when inflation is far from its target, but concentrates more on output stabilization when inflation is close to its target, allowing supply shocks and unforeseen fluctuations in aggregate demand to move inflation within a certain band. We use stochastic simulations of a small-scale rational expectations model to contrast the behavior of output and inflation under opportunistic and linear rules. Klassifikation: E31, E52, E58, E61. July, 2005. Yunus Aksoy; Athanasios Orphanides; David Small; Volker Wieland; David Wilcox workingpaper http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/4056 Mon, 05 Sep 2005 16:35:05 +0200 http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/4403 In this paper, we examine the cost of insurance against model uncertainty for the Euro area considering four alternative reference models, all of which are used for policy-analysis at the ECB.We find that maximal insurance across this model range in terms of aMinimax policy comes at moderate costs in terms of lower expected performance. We extract priors that would rationalize the Minimax policy from a Bayesian perspective. These priors indicate that full insurance is strongly oriented towards the model with highest baseline losses. Furthermore, this policy is not as tolerant towards small perturbations of policy parameters as the Bayesian policy rule. We propose to strike a compromise and use preferences for policy design that allow for intermediate degrees of ambiguity-aversion.These preferences allow the specification of priors but also give extra weight to the worst uncertain outcomes in a given context. Klassifikation: E52, E58, E61 . April 2005. Berc Rustem; Volker Wieland; Stan Zakovic workingpaper http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/4403 Mon, 13 Jun 2005 09:43:22 +0200 http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/4402 In this paper, we examine the cost of insurance against model uncertainty for the Euro area considering four alternative reference models, all of which are used for policy-analysis at the ECB.We find that maximal insurance across this model range in terms of aMinimax policy comes at moderate costs in terms of lower expected performance. We extract priors that would rationalize the Minimax policy from a Bayesian perspective. These priors indicate that full insurance is strongly oriented towards the model with highest baseline losses. Furthermore, this policy is not as tolerant towards small perturbations of policy parameters as the Bayesian policy rule. We propose to strike a compromise and use preferences for policy design that allow for intermediate degrees of ambiguity-aversion.These preferences allow the specification of priors but also give extra weight to the worst uncertain outcomes in a given context. Klassifikation: E52, E58, E61. April 2005. Keith Küster; Volker Wieland workingpaper http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/4402 Mon, 13 Jun 2005 09:42:51 +0200