TY  - UNPD
A1  - Davig, Troy
A1  - Gurkaynak, Refet S.
T1  - Is optimal monetary policy always optimal?
T2  - Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 510
N2  - No. And not only for the reason you think. In a world with multiple inefficiencies the single policy tool the central bank has control over will not undo all inefficiencies; this is well understood. We argue that the world is better characterized by multiple inefficiencies and multiple policy makers with various objectives. Asking the policy question only in terms of optimal monetary policy effectively turns the central bank into the residual claimant of all policy and gives the other policymakers a free hand in pursuing their own goals. This further worsens the tradeoffs faced by the central bank. The optimal monetary policy literature and the optimal simple rules often labeled flexible inflation targeting assign all of the cyclical policymaking duties to central banks. This distorts the policy discussion and narrows the policy choices to a suboptimal set. We highlight this issue and call for a broader thinking of optimal policies.
T3  - CFS working paper series - 510 
KW  - Central Banking
KW  - Monetary Policy
KW  - Fiscal Policy
KW  - Optimal Policy
KW  - Optimal Policy Mix
Y1  - 2015
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/38280
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-382807
UR  - http://ssrn.com/abstract=2645699
N1  - First Draft: December 2014 ; This version: July 28, 2015
IS  - version: July 28, 2015
PB  - Center for Financial Studies
CY  - Frankfurt, M.
ER  -