Learning, uncertainty and central bank activism in an economy with strategic interactions

Martin Ellison and Natacha Valla

No 28, Working Paper Series from European Central Bank

Abstract: In this paper we examine the optimal level of central bank activism in a standard model of monetary policy with uncertainty, learning and strategic interactions. We calibrate the model using G7 data and find that the presence of strategic interactions between the central bank and private agents creates an additional motivation for caution in optimal monetary policy. An active policy designed to help learning and reduce future uncertainty creates extra volatility in inflation expectations, which is detrimental to welfare. JEL Classification: D81, D83, D84, E52, E58

Keywords: activism; learning; monetary policy; strategic interactions; uncertainty (search for similar items in EconPapers)
Date: 2000-08
Note: 73054
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Learning, uncertainty and central bank activism in an economy with strategic interactions (2001)
Working Paper: LEARNING, UNCERTAINTY AND CENTRAL BANK ACTIVISM IN AN ECONOMY WITH STRATEGIC INTERACTIONS (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:200028

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