EconPapers    
Economics at your fingertips  
 

Monetary Policy with Imperfect Knowledge

Athanasios Orphanides () and John Williams ()

Journal of the European Economic Association, 2006, vol. 4, issue 2-3, 366-375

Abstract: We examine the performance and robustness of monetary policy rules when the central bank and the public have imperfect knowledge of the economy and continuously update their estimates of model parameters. We find that versions of the Taylor rule calibrated to perform well under rational expectations with perfect knowledge perform very poorly when agents are learning and the central bank faces uncertainty regarding natural rates. In contrast, difference rules, in which the change in the interest rate is determined by the inflation rate and the change in the unemployment rate, perform well when knowledge is both perfect and imperfect. (JEL: E52) (c) 2006 by the European Economic Association.

Date: 2006
References: Add references at CitEc
Citations: View citations in EconPapers (51) Track citations by RSS feed

Downloads: (external link)
http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1542-4774/issues link to full text (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Monetary policy with imperfect knowledge (2005) Downloads
Working Paper: Monetary policy with imperfect knowledge (2005) Downloads
Working Paper: Monetary Policy with Imperfect Knowledge (2001)
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:tpr:jeurec:v:4:y:2006:i:2-3:p:366-375

Ordering information: This journal article can be ordered from
http://www.mitpressjournals.org/jeea

Access Statistics for this article

Journal of the European Economic Association is currently edited by Xavier Vives, George-Marios Angeletos, Orazio P. Attanasio, Fabio Canova and Roberto Perotti

More articles in Journal of the European Economic Association from MIT Press
Bibliographic data for series maintained by Ann Olson ().

 
Page updated 2019-10-20
Handle: RePEc:tpr:jeurec:v:4:y:2006:i:2-3:p:366-375