Poole in the New Keynesian Model

Harris Dellas () and Fabrice Collard

No 4083, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study the properties of alternative central bank targeting procedures within the standard New Keynesian model. We find that Poole?s famous insights concerning the output stabilization properties of money and interest-rate targeting obtain when intertemporal substitution is low, and that output volatility rankings do not induce similar welfare rankings. Unlike the popular presumption, money targeting always fares better for money demand shocks. For fiscal shocks, money targeting does better for low and worse for high degree of intertemporal substitution. The opposite pattern obtains for supply shocks.

Keywords: Poole; Targeting; Macroeconomic volatility; Welfare (search for similar items in EconPapers)
JEL-codes: E32 E52 (search for similar items in EconPapers)
Date: 2003-10
New Economics Papers: this item is included in nep-mac and nep-mon
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Journal Article: Poole in the New Keynesian model (2005)
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