The performance of forecast-based monetary policy rules under model uncertainty

Andrew Levin (), Volker Wieland and John Williams

No 2003/06, CFS Working Paper Series from Center for Financial Studies (CFS)

Abstract: We investigate the performance of forecast-based monetary policy rules using five macroeconomic models that reflect a wide range of views on aggregate dynamics. We identify the key characteristics of rules that are robust to model uncertainty: such rules respond to the one- year-ahead inflation forecast and to the current output gap and incorporate a substantial degree of policy inertia. In contrast, rules with longer forecast horizons are less robust and are prone to generating indeterminacy. Finally, we identify a robust benchmark rule that performs very well in all five models over a wide range of policy preferences.

Keywords: Inflation forecast targeting; optimal monetary policy (search for similar items in EconPapers)
JEL-codes: E31 E52 E58 E61 (search for similar items in EconPapers)
Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (266)

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Related works:
Journal Article: The Performance of Forecast-Based Monetary Policy Rules Under Model Uncertainty (2003)
Working Paper: The performance of forecast-based monetary policy rules under model uncertainty (2001)
Working Paper: The performance of forecast-based monetary policy rules under model uncertainty (2001)
Working Paper: The Performance of Forecast-Based Monetary Policy Rules under Model Uncertainty (2000)
Working Paper: THE PERFORMANCE OF FORECAST-BASED MONETARY POLICY RULES UNDER MODEL UNCERTAINTY (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfswop:200306

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