Delegating optimal monetary policy inertia

Florin Bilbiie

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: In a forward-looking business cycle model, central banks can achieve the (timeless)optimal commitment equilibrium even in the absence of a commitment technology, if they are delegated with an objective function that is different from the societal one. The paper develops a general linear-quadratic method to solve for the optimal delegation parameters that generate the optimal amount of inertia in a Markov-perfect equilibrium, and studies the optimal design of some policy regimes that are nested within this framework: the (squared) optimal targeting rule; inflation, output-gap growth and nominal income growth targeting; and inflation and output-gap contracts.

Keywords: discretion and commitment; inertia; optimal delegation; stabilization bias; timeless-optimal policy; inflation; output gap growth; nominal income growth targeting (search for similar items in EconPapers)
Date: 2014-11
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Citations: View citations in EconPapers (15)

Published in Journal of Economic Dynamics and Control, 2014, 48, pp.63-78. ⟨10.1016/j.jedc.2014.08.019⟩

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Related works:
Journal Article: Delegating optimal monetary policy inertia (2014)
Working Paper: Delegating optimal monetary policy inertia (2014)
Working Paper: Delegating optimal monetary policy inertia (2014)
Working Paper: Delegating Optimal Monetary Policy Inertia (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:hal-01162224

DOI: 10.1016/j.jedc.2014.08.019

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