How forward-looking is optimal monetary policy?
Marc Giannoni () and
Michael Woodford ()
Proceedings, 2003, 1425-1483
We calculate optimal monetary policy rules for several variants of a simple optimizing model of the monetary transmission mechanism with sticky prices and/or wages. We show that robustly optimal rules can be represented by interest-rate feedback rules that generalize the celebrated proposal of Taylor (1993). Optimal rules, however, require that the current interest rate operating target depend positively on the recent past level of the operating target, and its recent rate of increase, in a way that is characteristic of estimated central bank reaction functions, but not of Taylor's proposal.
Keywords: Banks and banking, Central; Inflation (Finance); Monetary policy (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (70) Track citations by RSS feed
There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.
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:fip:fedcpr:y:2003:p:1425-1483
Ordering information: This journal article can be ordered from
Access Statistics for this article
More articles in Proceedings from Federal Reserve Bank of Cleveland Contact information at EDIRC.
Bibliographic data for series maintained by ().