Simple Monetary Policy Rules Under Model Uncertainty (Electronic book text)


This paper employs stochastic simulations and stability analysis to compare the performances of several types of simple monetary policy rules in a small model of the U.S. economy. The model, which is estimated with quarterly data for the post-1968 period, exhibits a moderate degree of nonlinearity, assumes that inflation expectations have a model-consistent component, and treats the non-accelerating-inflation rate of unemployment (NAIRU) as a time-varying and unobservable parameter. The simulation framework assumes that policymakers update their estimates of the NAIRU period by period, using their information about the macroeconomic model, and in a manner that implicitly recognizes the tendency to make serially-correlated errors in estimating the NAIRU.

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Product Description

This paper employs stochastic simulations and stability analysis to compare the performances of several types of simple monetary policy rules in a small model of the U.S. economy. The model, which is estimated with quarterly data for the post-1968 period, exhibits a moderate degree of nonlinearity, assumes that inflation expectations have a model-consistent component, and treats the non-accelerating-inflation rate of unemployment (NAIRU) as a time-varying and unobservable parameter. The simulation framework assumes that policymakers update their estimates of the NAIRU period by period, using their information about the macroeconomic model, and in a manner that implicitly recognizes the tendency to make serially-correlated errors in estimating the NAIRU.

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Product Details

General

Imprint

International Monetary Fund

Country of origin

United States

Release date

1999

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Authors

Format

Electronic book text

Pages

61

ISBN-13

978-1-281-60121-6

Barcode

9781281601216

Categories

LSN

1-281-60121-7



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