Informational Accuracy and the Optimal Monetary Regime

David Demery and Nigel Duck ()

Bristol Economics Discussion Papers from School of Economics, University of Bristol, UK

Abstract: King (1997) develops a framework for assessing four monetary regimes: an optimal state-contingent rule; a non-contingent rule; pure discretion; and a Rogoffian conservative central banker. Using this framework we show (a) that King is wrong to claim that it implies that an optimally-conservative central banker always dominates a fixed-rule monetary regime; (b) that if the private sector has a signal of the shock to which monetary policy responds - the accuracy of which is exogenously fixed - then either the optimal state-contingent rule or the optimally-conservative central bank can dominate; and (c) that if the private sector optimally chooses the accuracy of its signal then any regime can dominate.

Keywords: Monetary policy; expectations; Rogoffian central banker. (search for similar items in EconPapers)
JEL-codes: E3 E52 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2005-04
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:bri:uobdis:05/571

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