Arbeitspapier
Discretion rather than rules: Equilibrium uniqueness and forward guidance with inconsistent optimal plans
New Keynesian economies with active interest rate rules gain equilibrium determinacy from the central bank's incredible off-equilibrium-path promises (Cochrane, 2011). We suppose instead that the central bank sets interest rate paths and occasionally has the discretion to change them. Private agents taking future central bank actions and their own best responses to them as given reduces the scope for self-fulfilling prophecies. With empirically-reasonable frequencies of central-bank reoptimization, the monetary-policy game has a unique Markov-perfect equilibrium wherein forward guidance influences current outcomes without displaying a forward-guidance puzzle.
- Language
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Englisch
- Bibliographic citation
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Series: Working Paper ; No. 2018-14
- Classification
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Wirtschaft
General Aggregative Models: Keynes; Keynesian; Post-Keynesian
Monetary Policy
- Subject
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Monetary Policy
Open Mouth Operations
Quasi-Commitment
Ramsey Problem
- Event
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Geistige Schöpfung
- (who)
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Campbell, Jeffrey R.
Weber, Jacob P.
- Event
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Veröffentlichung
- (who)
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Federal Reserve Bank of Chicago
- (where)
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Chicago, IL
- (when)
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2018
- DOI
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doi:10.21033/wp-2018-14
- Handle
- Last update
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10.03.2025, 11:42 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Campbell, Jeffrey R.
- Weber, Jacob P.
- Federal Reserve Bank of Chicago
Time of origin
- 2018
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Unique(ness)
Uniqueness and non-uniqueness of singular diffusion operators