EconPapers    
Economics at your fingertips  
 

Monetary Policy Under Uncertainty in Micro-Founded Macroeconometric Models

Andrew Levin (), Alexei Onatski (), John Williams () and Noah Williams ()

No 11523, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We use a micro-founded macroeconometric modeling framework to investigate the design of monetary policy when the central bank faces uncertainty about the true structure of the economy. We apply Bayesian methods to estimate the parameters of the baseline specification using postwar U.S. data, and then determine the policy under commitment that maximizes household welfare. We find that the performance of the optimal policy is closely matched by a simple operational rule that focuses solely on stabilizing nominal wage inflation. Furthermore, this simple wage stabilization rule is remarkably robust to uncertainty about the model parameters and to various assumptions regarding the nature and incidence of the innovations. However, the characteristics of optimal policy are very sensitive to the specification of the wage contracting mechanism, thereby highlighting the importance of additional research regarding the structure of labor markets and wage determination.

JEL-codes: C11 C22 E31 E52 E61 E63 (search for similar items in EconPapers)
Date: 2005-08
New Economics Papers: this item is included in nep-cba, nep-fmk, nep-mac and nep-mon
Note: EFG ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (296) Track citations by RSS feed

Published as Monetary Policy under Uncertainty in Micro-Founded Macroeconometric Models , Andrew T. Levin, Alexei Onatski, John Williams, Noah M. Williams. in NBER Macroeconomics Annual 2005, Volume 20 , Gertler and Rogoff. 2006

Downloads: (external link)
http://www.nber.org/papers/w11523.pdf (application/pdf)

Related works:
Chapter: Monetary Policy under Uncertainty in Micro-Founded Macroeconometric Models (2006) Downloads
Working Paper: Monetary policy under uncertainty in micro-founded macroeconometric models (2005) Downloads
Working Paper: Monetary Policy under Uncertainty in Micro-Founded Macroeconometric Models (2005)
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:nbr:nberwo:11523

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w11523

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2022-06-22
Handle: RePEc:nbr:nberwo:11523