Transmission lags and optimal monetary policy
Juha Kilponen () and
Kai Leitemo ()
Journal of Economic Dynamics and Control, 2011, vol. 35, issue 4, 565-578
The credibility problems of monetary policy are enlarged by transmission lags whenever the welfare criterion consists of arguments with differing transmission lags. If, as usually argued, prices react to monetary policy with a longer lag than output, the discretionary bias is substantially increased under a consumer welfare maximizing policy criterion (flexible inflation targeting) in the prototype New Keynesian model. Money growth targeting can significantly reduce the discretionary bias, but is not robust to other specifications of welfare with higher valuation of output stability.
Keywords: Discretion; and; stabilization; bias; Monetary; policy; Transmission; lags; Inflation; targeting; Money; targeting (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
Working Paper: Transmission lags and optimal monetary policy (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:35:y:2011:i:4:p:565-578
Access Statistics for this article
Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok
More articles in Journal of Economic Dynamics and Control from Elsevier
Bibliographic data for series maintained by Catherine Liu ().