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Optimal Monetary Policy Inertia

Michael Woodford ()

Working Papers from Stockholm - International Economic Studies

Abstract: The first section of this paper presents a model of the economy and poses the problem of optimal monetary policy. The second characterizes the responses of endogenous variables, including nominal interest rates, to shocks under an optimal regime, and highlights the advantages of commitment, by contrasting the optimal responses with those that would result from optimization under discrestion. Then, the next section considers the optimal assignment of an objective to a central bank with instrument but not goal) independence, that is expected to pursue its assigned goal under discretion. The last section considers the form of interest rate feedback rule that can achieve the desired dynamic responses to chocks, if the central bank's commitment to such a rule is credible. to the private sector.

Keywords: MONETARY POLICY; CENTRAL BANKS; MACROECONOMICS (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Pages: 90 pages
Date: 1999
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Working Paper: Optimal Monetary Policy Inertia (2000) Downloads
Journal Article: Optimal Monetary Policy Inertia (1999) Downloads
Journal Article: Optimal monetary policy inertia (1999)
Working Paper: Optimal Monetary Policy Inertia (1999) Downloads
Working Paper: Optimal monetary policy inertia (1999) Downloads
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