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Federal Reserve Bank of Boston
Working Papers
In noise we trust? Optimal monetary policy with random targets
Ethan Cohen-Cole
Bogdan Cosmaciuc
Abstract

We show that a monetary policy in which the central bank commits to a randomized inflation target allows for potentially faster-expectations convergence than with a fixed target. The randomized target achieves faster convergence in particular in transition environments: those demonstrating either particularly high or low inflation. ; Quantitative Analysis Unit Working Paper QAU07-1


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Ethan Cohen-Cole & Bogdan Cosmaciuc, In noise we trust? Optimal monetary policy with random targets, Federal Reserve Bank of Boston, Working Papers 06-14, 2006.
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Keywords: Monetary policy
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