Optimal monetary policy in a hybrid New Keynesian model with a cost channel

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Title: Optimal monetary policy in a hybrid New Keynesian model with a cost channel
Author: Bask, Mikael
Organization: Suomen Pankki
Series: Suomen Pankin keskustelualoitteita
Series number: 24/2007
Year of publication: 2007
Publication date: 8.8.2007
Pages: 32 s.
Keywords: säännöt; rahapolitiikka; korot; mallit; makrotaloustiede; odotukset;
JEL: E52; E61
Abstract: This study shows that an expectations-based optimal policy rule has desirable properties in a standard macroeconomic model incorporating a cost channel for monetary disturbances and inflation rate expectations that are partly backward-looking. Specifically, optimal monetary policy under commitment is associated with a determinate REE that is stable under learning, whereas, under discretion, the central bank has to be sufficiently inflation averse for the equilibrium to have these properties. Keywords: commitment, determinacy, discretion, expectations-based rule, least squares learning JEL classification numbers: E52, E61
Rights: https://helda.helsinki.fi/bof/copyright


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