Indicator Variables for Optimal Policy
Lars Svensson () and
Michael Woodford ()
No 7953, NBER Working Papers from National Bureau of Economic Research, Inc
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.
JEL-codes: E37 E47 (search for similar items in EconPapers)
Note: EFG ME
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Published as Journal of Monetary Economics, Vol. 50, no. 3 (April 2003): 691-720
Published as Lars E.O. Svensson & Michael Woodford, 2000. "Indicator variables for optimal policy," Proceedings, Federal Reserve Bank of San Francisco.
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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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