Economics at your fingertips  

Does uncertainty make a time-varying natural rate of interest irrelevant for the conduct of monetary policy?

Jean-Stéphane Mésonnier () and Jean-Paul Renne

Working papers from Banque de France

Abstract: We compute optimized monetary policy rules for the ECB when the euro area economy is described by a small empirical macroeconomic model with a time-varying natural interest rate which is positively correlated with fluctuations in trend output growth. We investigate the consequences of both measurement uncertainty with respect to unobservable variables and uncertainty about key model parameters. An optimized Taylor rule with time-varying neutral rate appears to perform well compared to the unconstrained optimal policy, and better than other simple rules found in the literature, even when it is penalized by taking into account both types of uncertainty.

Keywords: Monetary policy rules; Natural rate of interest; Uncertainty. (search for similar items in EconPapers)
JEL-codes: E52 E37 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2007
References: Add references at CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link) ... g-paper_175_2007.pdf (application/pdf)

Related works:
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:

Access Statistics for this paper

More papers in Working papers from Banque de France Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS. Contact information at EDIRC.
Bibliographic data for series maintained by Michael brassart ().

Page updated 2020-07-08
Handle: RePEc:bfr:banfra:175