Central bank objectives, monetary policy rules, and limited information

Jonathan Benchimol

Post-Print from HAL

Abstract: Since the Global Financial Crisis, a lively debate has emerged regarding the monetary policy rule the central bank of a small open economy (SOE) follows and should follow. By identifying the monetary policy rule that best fits historical data and minimizes central bank loss functions, this study contributes to this debate. We estimate a medium-scale micro-founded SOE model under various monetary policy rules using Israeli data from 1994 to 2019. Our results indicate that the model achieves a better fit to historical data when assuming inflation targeting (IT) compared to nominal income targeting (NGDP). Given central bank goals, shock uncertainty, and limited information, NGDP targeting rules may have been more desirable over the last three decades than IT rules.

Keywords: Inflation targeting; NGDP targeting; Limited information; Monetary policy rule; Central bank loss (search for similar items in EconPapers)
Date: 2024-06
Note: View the original document on HAL open archive server: https://hal-emse.ccsd.cnrs.fr/emse-04624959v1
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Journal of Macroeconomics, 2024, 80 (103604), pp.1-37. ⟨10.1016/j.jmacro.2024.103604⟩

Downloads: (external link)
https://hal-emse.ccsd.cnrs.fr/emse-04624959v1/document (application/pdf)

Related works:
Journal Article: Central bank objectives, monetary policy rules, and limited information (2024)
Working Paper: Central Bank Objectives, Monetary Policy Rules, and Limited Information (2024)
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:hal:journl:emse-04624959

DOI: 10.1016/j.jmacro.2024.103604

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().