Search Results
Journal Article
Time-inconsistent monetary policies: recent research
This Economic Letter looks at time-inconsistency, describing why the same mechanisms that can lead to higher average inflation also can hamper policymakers' efforts to keep inflation stable.
Journal Article
Fiscal and monetary policy: conference summary
This Economic Letter summarizes the papers presented at a conference on "Fiscal and Monetary Policy" held at the Federal Reserve Bank of San Francisco on March 4 and 5, 2005.
Working Paper
Instability under Nominal GDP Targeting: The Role of Expectations
Ball (1997) shows using a small closed economy model that nominal GDP targeting can lead to instability. This paper extends Ball’s model to uncover the role inflation expectations play in generating this instability. By changing the process by which inflation expectations are formed in the short-run aggregate supply curve we show that nominal GDP targeting in either level or growth form does not generally result in instability. We further show that in Ball’s (1997) case where exact targeting causes instability that moving to inexact targeting restores stability.
Journal Article
Monetary policy, transparency, and credibility: conference summary
This Economic Letter summarizes the papers presented at a conference on "Monetary Policy, Transparency, and Credibility" held at the Federal Reserve Bank of San Francisco on March 23 and 24, 2007.
Working Paper
Learning and Optimal Monetary Policy
To conduct policy efficiently, central banks must use available data to infer, or learn, the relevant structural relationships in the economy. However, because a central bank’s policy affects economic outcomes, the chosen policy may help or hinder its efforts to learn. This paper examines whether real-time learning allows a central bank to learn the economy’s underlying structure and studies the impact that learning has on the performance of optimal policies under a variety of learning environments. Our main results are as follows. First, when monetary policy is formulated as an optimal ...
Working Paper
The Optimal Degree of Monetary-Discretion in a New Keynesian Model with Private Information
This paper considers the optimal degree of monetary-discretion when the central bank conducts policy based on its private information about the state of the economy and is unable to commit. Society seeks to maximize social welfare by imposing restrictions on the central bank's actions over time, and the central bank takes these restrictions and the New Keynesian Phillips curve as constraints. By solving a dynamic mechanism design problem we find that it is optimal to grant ?constrained discretion? to the central bank by imposing both upper and lower bounds on permissible inflation, and that ...
Journal Article
Fixing the New Keynesian Phillips curve
This Economic Letter looks at the problems with the NKPC and discusses some alternatives that are increasingly being used to think about inflation and the monetary policy transmission mechanism.
Journal Article
Uncertainty and monetary policy
Since uncertainty is such an important issue for policymakers it should come as no surprise that economists have made a study of its various guises and developed formal techniques to help understand and mitigate its effects. In this Letter I discuss, in broad-brush terms, some of these techniques and their implications for the conduct of monetary policy.
Journal Article
New Keynesian models and their fit to the data
In this Economic Letter, we discuss the basic properties of hybrid New Keynesian models and examine the extent to which they successfully explain U.S. macroeconomic data.
Working Paper
Exploring the Role of the Real Exchange Rate in Australian Monetary Policy
An important issue in small open-economies is whether policymakers should respond to exchange rate movements when they formulate monetary policy. Micro-founded models tend to suggest that there is little to be gained from responding to exchange rate movements, and the literature has largely concluded that such a response is unnecessary, or even undesirable (Taylor, 2001). This paper examines this issue using an estimated model of the Australian economy. In contrast to micro-founded models, according to this model policymakers should allow for movements in the real exchange rage and the ...