Delegating optimal monetary policy inertia

Details

Serval ID
serval:BIB_5F0E0E606BDF
Type
Article: article from journal or magazin.
Collection
Publications
Title
Delegating optimal monetary policy inertia
Journal
Journal of Economic Dynamics and Control
Author(s)
Bilbiie F.O.
ISSN
0165-1889
Publication state
Published
Issued date
11/2014
Peer-reviewed
Oui
Volume
48
Pages
63-78
Language
english
Abstract
In a forward-looking business cycle model, central banks can achieve the (timeless)optimal commitment equilibrium even in the absence of a commitment technology, if they are delegated with an objective function that is different from the societal one. The paper develops a general linear-quadratic method to solve for the optimal delegation parameters that generate the optimal amount of inertia in a Markov-perfect equilibrium, and studies the optimal design of some policy regimes that are nested within this framework: the (squared) optimal targeting rule; inflation, output-gap growth and nominal income growth targeting; and inflation and output-gap contracts.
Keywords
Discretion and commitment, Inertia, Optimal delegation, Stabilization bias, Timeless-optimal policy, Inflation, output gap growth and nominal income growth targeting
Web of science
Create date
01/11/2018 11:37
Last modification date
20/08/2019 15:16
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