EconPapers    
Economics at your fingertips  
 

Optimal Commitment Policy Under Noisy Information

Kosuke Aoki

No 3370, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This Paper studies an advantage of commitment over discretion when a central bank observes only noisy measures of current inflation and output, in the context of an optimizing model with nominal-price stickiness. Under a commitment regime, if current policy turns out to be too expansionary (contractionary) because of the bank?s information problem, subsequent policies should be slightly contractionary (expansionary). By following this approach, the central bank can improve the trade-off between the fluctuations of its goal variables caused by economic shocks and those fluctuations caused by the bank?s response to measurement error.

Keywords: Optimal monetary policy; Commitment; Noisy information (search for similar items in EconPapers)
JEL-codes: E31 E52 (search for similar items in EconPapers)
Date: 2002-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

Downloads: (external link)
https://cepr.org/publications/DP3370 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Optimal commitment policy under noisy information (2006) Downloads
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:cpr:ceprdp:3370

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP3370

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().

 
Page updated 2025-03-19
Handle: RePEc:cpr:ceprdp:3370