Persistence-Dependent Optimal Policy Rules

Jean-Bernard Chatelain and Kirsten Ralf

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Abstract: A policy target (for example inflation) may depend on the persistent component of exogenous shocks, such as the cost-push shock of oil, energy or imported prices. The larger the persistence of these exogenous shocks, the larger the welfare losses and the larger the response of policy instrument to this exogenous shock in a feedback rule, in order to decrease the sensitivity of the policy target to this shock.

Keywords: Core inflation; Imported inflation; Optimal Policy; Welfare; Policy rule (search for similar items in EconPapers)
Date: 2020-08
New Economics Papers: this item is included in nep-cba, nep-ene and nep-mon
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Working Paper: Persistence-Dependent Optimal Policy Rules (2020)
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