Optimal Monetary Policy

Felix Geiger

Chapter Appendix E in The Yield Curve and Financial Risk Premia, 2011, pp 283-288 from Springer

Abstract: Abstract Discretion vs. Commitment. The central banker’s objective function at time time t = 0 is given by E.1 $$ \begin{array}{rlrlrl} &L = {E}_{0}{ \sum }_{t=0}^{\infty }{\beta }^{t}{L}_{ t}\qquad \text{ with}\qquad {L}_{t} = {\pi }_{t}^{2} + \omega {y}_{ t}^{2} & E.1 \end{array}$$ subject to E.2 $$ \begin{array}{rlrlrl} &{\pi }_{t} = \alpha {y}_{t} + \beta {E}_{t}[{\pi }_{t+1}] + {u}_{t}. & E.2 \end{array}$$

Date: 2011
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DOI: 10.1007/978-3-642-21575-9_13

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