Optimal Monetary Policy Under Bounded Rationality
Jonathan Benchimol () and
No 336, Globalization Institute Working Papers from Federal Reserve Bank of Dallas
Optimal monetary policy under discretion, commitment, and optimal simple rules regimes is analyzed through a behavioral New Keynesian model. Flexible price level targeting dominates under discretion; flexible inflation targeting dominates under commitment; and strict price level targeting dominates when using optimal simple rules. Stabilizing properties and bounded rationality-independence generally affect the regime's optimality. The policymaker's knowledge of an agent's myopia is decisive, whereas bounded rationality is not necessarily associated with decreased welfare. Several forms of economic inattention can be welfare increasing.
JEL-codes: D11 E37 C53 D01 E52 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2018-01-01, Revised 2018-01-01
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac, nep-mon and nep-upt
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Working Paper: Optimal Monetary Policy under Bounded Rationality (2019)
Working Paper: Optimal Monetary Policy Under Bounded Rationality (2019)
Working Paper: Optimal monetary policy under bounded rationality (2018)
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