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 |
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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 |