Monetary Policy with Uncertain Parameters

Ulf Söderström ()

Scandinavian Journal of Economics, 2002, vol. 104, issue 1, 125-145

Abstract: This paper shows that—in contrast to the received wisdom—uncertainty about the parameters in a dynamic macroeconomic model may lead to more aggressive monetary policy. In particular, when there is uncertainty about the persistence of inflation, it may be optimal for the central bank to respond to shocks more aggressively in order to reduce uncertainty about the future development of inflation. Uncertainty about other parameters, on the other hand, dampens the policy response. JEL classification: E43; E52

Date: 2002
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Citations: View citations in EconPapers (110)

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https://doi.org/10.1111/1467-9442.00275

Related works:
Working Paper: Monetary policy with uncertain parameters (2000)
Working Paper: Monetary policy with uncertain parameters (1999)
Working Paper: Monetary policy with uncertain parameters (1999)
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