Revisiting the role of multiplicative uncertainty in a model without inflationary bias

Giuseppe Ciccarone and Enrico Marchetti

No 110, Working Papers in Public Economics from Department of Economics and Law, Sapienza University of Roma

Abstract: Kobayashi (2003) aims to show that, in a model without inflationary bias, an increase in the degree of multiplicative uncertainty on the transmission mechanism of monetary policy improves social welfare when central bank’s preferences are highly uncertain. We demonstrate that this result applies only to the case in which society is strictly conservative, i.e., when the weight attached to output in the social welfare function is lower than one.

Keywords: Multiplicative uncertainty; Brainard conservatism; Uncertain preferences; Monetary policy. (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Pages: 11
Date: 2008-02
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Journal Article: Revisiting the role of multiplicative uncertainty in a model without inflationary bias (2009)
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