Delegating optimal monetary policy inertia

Florin Bilbiie

Journal of Economic Dynamics and Control, 2014, vol. 48, issue C, 63-78

Abstract: In a forward-looking business cycle model, central banks can achieve the (timeless)optimal commitment equilibrium even in the absence of a commitment technology, if they are delegated with an objective function that is different from the societal one. The paper develops a general linear-quadratic method to solve for the optimal delegation parameters that generate the optimal amount of inertia in a Markov-perfect equilibrium, and studies the optimal design of some policy regimes that are nested within this framework: the (squared) optimal targeting rule; inflation, output-gap growth and nominal income growth targeting; and inflation and output-gap contracts.

Keywords: Discretion and commitment; Inertia; Optimal delegation; Stabilization bias; Timeless-optimal policy; Inflation, output gap growth and nominal income growth targeting (search for similar items in EconPapers)
JEL-codes: C61 C73 E31 E52 E58 E61 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165188914002085
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Delegating optimal monetary policy inertia (2014)
Working Paper: Delegating optimal monetary policy inertia (2014)
Working Paper: Delegating optimal monetary policy inertia (2014)
Working Paper: Delegating Optimal Monetary Policy Inertia (2009)
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:eee:dyncon:v:48:y:2014:i:c:p:63-78

DOI: 10.1016/j.jedc.2014.08.019

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 ().