Arbeitspapier
Monetary policy with judgment: forecast targeting
“Forecast targeting,” forward-looking monetary policy that uses central-bank judgment to construct optimal policy projections of the target variables and the instrument rate, may perform substantially better than monetary policy that disregards judgment and follows a given instrument rule. This is demonstrated in a few examples for two empirical models of the U.S. economy, one forward looking and one backward looking. A practical finite-horizon approximation is used. Optimal policy projections corresponding to the optimal policy under commitment in a timeless perspective can easily be constructed. The whole projection path of the instrument rate is more important than the current instrument setting. The resulting reduced-form reaction function for the current instrument rate is a very complex function of all inputs in the monetary-policy decision process, including the central bank’s judgment. It cannot be summarized as a simple reaction function such as a Taylor rule. Fortunately, it need not be made explicit.
- Sprache
-
Englisch
- Erschienen in
-
Series: ECB Working Paper ; No. 476
- Klassifikation
-
Wirtschaft
Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems
Monetary Policy
Central Banks and Their Policies
- Thema
-
forecasts
inflation targeting
optimal monetary policy
Geldpolitik
Geldpolitisches Ziel
Regelbindung versus Diskretion
Inflationssteuerung
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Svensson, Lars E. O.
- Ereignis
-
Veröffentlichung
- (wer)
-
European Central Bank (ECB)
- (wo)
-
Frankfurt a. M.
- (wann)
-
2005
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:44 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Svensson, Lars E. O.
- European Central Bank (ECB)
Entstanden
- 2005
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