Indicator Variables for Optimal Policy
Lars Svensson () and
Michael Woodford ()
No 688, Seminar Papers from Stockholm University, Institute for International Economic Studies
The optimal weights on indicators in models with partial information about the state of the economy and forward-looking variables are derived and interpreted, both for equilibria under discretion and under commitment. An example of optimal monetary policy with a partially observable potential output and a forward-looking indicator is examined. The optimal response to the optimal estimate of potential output displays certainty-equivalence, whereas the optimal response to the imperfect observation of output depends on the noise in this observation.
Keywords: Partial information; Kalman filter; monetary policy; discretion and commitment (search for similar items in EconPapers)
JEL-codes: E37 E47 E52 E58 (search for similar items in EconPapers)
Pages: 53 pages
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Journal Article: Indicator variables for optimal policy (2003)
Journal Article: Indicator variables for optimal policy (2000)
Working Paper: Indicator variables for optimal policy (2000)
Working Paper: Indicator Variables for Optimal Policy (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iiessp:0688
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