Money as an indicator variable for monetary policy when money demand is forward looking

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Title: Money as an indicator variable for monetary policy when money demand is forward looking
Author: Kajanoja, Lauri
Organization: Suomen Pankki
Series: Suomen Pankin keskustelualoitteita
Series number: 9/2003
Year of publication: 2003
Publication date: 9.4.2003
Pages: 35 s.
Keywords: rahapolitiikka; indikaattorit; rahan määrä; mallit; euroalue; informaatio; kansantaloustiede;
JEL: E52; E58; E47
Abstract: This paper studies the gain from using money as an indicator when monetary policy in made under data uncertainty.We use a forward and backward looking model, calibrated for the euro area.The policymaker cannot completely observe the state of the economy. Money reveals some of the private sector's information to the policymaker, especially if there is a forward looking element in money demand.We show that observing money can considerably reduce the loss that is due to incomplete information.However, taking also into account other financial market data could decrease the marginal importance of money as an indicator. Key words: monetary policy, partial information, money, monetary aggregates, euro area JEL classification numbers: E52, E58, E47
Rights: https://helda.helsinki.fi/bof/copyright


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