Evaluating Monetary Policy Rules in Estimated Forward-Looking Models: A Comparison of US and German Monetary Policies

E. Jondeau and Hervé LE BIHAN ()

Documents de Travail from Banque de France

Abstract: In this paper, we estimate two small, forward-looking, macroeconomic models for the US and Germany and we compare the implied optimal monetary policy rules. Both models have a standard structure: an I-S curve, a Phillips curve, a short term interest-rate rule and a long term interest rate determined by the Expectations Hypothesis. They are intended to fit the data while allowing for some forward-looking behavior. They are estimated from 1968 to 1998, using the full-information maximum-likelihood procedure, so that forward-looking expectations are fully model-consistent. In order to evaluate monetary policy, we compute optimal policy frontiers and we perform some simulations of the model. German optimal monetary policy is found to require a more persistent and slightly stronger response to inflation and output than the US optimal policy.

Keywords: Forward-looking model; monetary policy rules (search for similar items in EconPapers)
JEL-codes: E52 E58 F41 (search for similar items in EconPapers)
Date: 2000
View list of references View citations in EconPapers

Downloads: (external link)
http://www.banque-france.fr/gb/publications/telechar/ner/ner76.pdf (application/pdf)

Related works:
Journal Article: Evaluating Monetary Policy Rules in Estimated Forward-Looking Models: A Comparison of US and German Monetary Policies (2002)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:bfr:banfra:76

Access Statistics for this paper

More papers in Documents de Travail from Banque de France
Address: Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS
Contact information at EDIRC.
Series data maintained by Thierry Demoulin ().