A quantitative analysis of optimal sustainable monetary policies

Takeki Sunakawa

Journal of Economic Dynamics and Control, 2015, vol. 52, issue C, 119-135

Abstract: This study examines the quantitative properties of optimal sustainable monetary policies using a monetary model with a stabilization bias. As in Kurozumi (2008), the optimal sustainable policy is a strategy considered in the absence of commitment technologies; however it is implemented following an optimal quasi-sustainable policy derived by assuming that the commitment technologies are present. This study finds that solving for the policy function of the optimal quasi-sustainable policy yields a result basically identical to the Ramsey-optimal commitment policy under a set of parameters commonly used in the literature. The simulation shows two further results: policymakers have incentive to deviate from the Ramsey-optimal commitment policy when the lagged output gap is large and the optimal quasi-sustainable policy endogenously diminishes the steadfastness of policymakers׳ commitment.

Keywords: Optimal monetary policy; Time inconsistency; Sustainable plans; Timeless perspective (search for similar items in EconPapers)
JEL-codes: E52 E58 E61 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:52:y:2015:i:c:p:119-135

DOI: 10.1016/j.jedc.2014.12.002

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