Monetary policy with uncertain parameters

Ulf Söderström ()

No 83, Working Paper Series from Sveriges Riksbank (Central Bank of Sweden)

Abstract: In a simple dynamic macroeconomic model, it is shown that uncertainty about structural parameters does not necessarily lead to more cautious monetary policy, refining the accepted wisdom concerning the effects of parameter uncertainty on optimal policy. In particular, when there is uncertainty about the persistence of inflation, it is optimal for the central bank to respond more aggressively to shocks than if the parameter were known with certainty, since the central bank wants to avoid bad outcomes in the future. Uncertainty about other parameters, in contrast, acts to dampen the policy response.

Keywords: Optimal monetary policy; parameter uncertainty; Brainard conservatism principle; interest rate smoothing (search for similar items in EconPapers)
JEL-codes: E43 E52 (search for similar items in EconPapers)
Pages: 21 pages
Date: 1999-05-01
New Economics Papers: this item is included in nep-cba and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Published in Scandinavian Journal of Economics, 2002, pages 125-145.

Downloads: (external link)
http://www.riksbank.com/upload/2480/WP_83.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.riksbank.com/upload/2480/WP_83.pdf [301 Moved Permanently]--> https://www.riksbank.se/en-gb/upload/2480/WP_83.pdf [301 Moved Permanently]--> http://archive.riksbank.se/Upload/2480/WP_83.pdf)

Related works:
Journal Article: Monetary Policy with Uncertain Parameters (2002)
Working Paper: Monetary policy with uncertain parameters (2000)
Working Paper: Monetary policy with uncertain parameters (1999)
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:hhs:rbnkwp:0083

Access Statistics for this paper

More papers in Working Paper Series from Sveriges Riksbank (Central Bank of Sweden) Sveriges Riksbank, SE-103 37 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Lena Löfgren ().