The Science of Monetary Policy: A New Keynesian Perspective

Richard Clarida, Jordi Galí and Mark Gertler

No 7147, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper reviews the recent literature on monetary policy rules. We exploit the monetary policy design problem within a simple baseline theoretical framework. We then consider the implications of adding various real world complications. Among other things, we show that the optimal policy implicitly incorporates inflation targeting. We also characterize the gains from making a credible commitment to fight inflation. In contrast to conventional wisdom, we show that gains from commitment may emerge even if the central bank is not trying to inadvisedly push output above its natural level. We also consider the implications of frictions such as imperfect information.

JEL-codes: E0 E5 (search for similar items in EconPapers)
Date: 1999-05
New Economics Papers: this item is included in nep-mon
Note: EFG ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3216)

Published as Journal of Economic Literature, Vol. 37, no. 2 (December 1999): 1661-1707.

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Journal Article: The Science of Monetary Policy: A New Keynesian Perspective (1999)
Working Paper: The Science of Monetary Policy: A New Keynesian Perspective (1999)
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