The Performance of Forecast-Based Monetary Policy Rules Under Model Uncertainty

Andrew Levin (), Volker Wieland and John Williams

American Economic Review, 2003, vol. 93, issue 3, 622-645

Abstract: We investigate the performance of forecast-based monetary policy rules using five macroeconomic models that reflect a wide range of views on aggregate dynamics. We identify the key characteristics of rules that are robust to model uncertainty; such rules respond to the one-year-ahead inflation forecast and to the current output gap and incorporate a substantial degree of policy inertia. In contrast, rules with longer forecast horizons are less robust and are prone to generating indeterminacy. Finally, we identify a robust benchmark rule that performs very well in all five models over a wide range of policy preferences.

Date: 2003
Note: DOI: 10.1257/000282803322157016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (305)

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/000282803322157016 (application/pdf)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: The performance of forecast-based monetary policy rules under model uncertainty (2003)
Working Paper: The performance of forecast-based monetary policy rules under model uncertainty (2001)
Working Paper: The performance of forecast-based monetary policy rules under model uncertainty (2001)
Working Paper: The Performance of Forecast-Based Monetary Policy Rules under Model Uncertainty (2000)
Working Paper: THE PERFORMANCE OF FORECAST-BASED MONETARY POLICY RULES UNDER MODEL UNCERTAINTY (2000)
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: https://EconPapers.repec.org/RePEc:aea:aecrev:v:93:y:2003:i:3:p:622-645

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().