Robustly optimal monetary policy with near-rational expectations

  • The paper considers optimal monetary stabilization policy in a forward-looking model, when the central bank recognizes that private-sector expectations need not be precisely model-consistent, and wishes to choose a policy that will be as good as possible in the case of any beliefs that are close enough to model-consistency. It is found that commitment continues to be important for optimal policy, that the optimal long-run inflation target is unaffected by the degree of potential distortion of beliefs, and that optimal policy is even more history-dependent than if rational expectations are assumed. JEL Classification: E52, E58, E42

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Metadaten
Author:Michael Woodford
URN:urn:nbn:de:hebis:30-38229
Parent Title (German):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2007,12
Series (Serial Number):CFS working paper series (2007, 12)
Document Type:Working Paper
Language:English
Year of Completion:2005
Year of first Publication:2005
Publishing Institution:Universit├Ątsbibliothek Johann Christian Senckenberg
Release Date:2007/02/23
Tag:Commitment; History-Dependent Policy; Optimal Monetary Policy
GND Keyword:Geldpolitik
Issue:December 13, 2005
Page Number:50
HeBIS-PPN:190113529
Institutes:Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht