Optimal monetary policy with durable and non-durable goods

Arbeitspapier

The durable goods sector is much more interest sensitive than the non-durables sector, and these sectoral differences have important implications for monetary policy. In this paper, we perform VAR analysis of quarterly US data and find that a monetary policy innovation has a peak impact on durable expenditures that is roughly five times as large as its impact on non-durable expenditures. We then proceed to formulate and calibrate a two-sector dynamic general equilibrium model that roughly matches the impulse response functions of the data. While the social welfare function involves sector-specific output gaps and inflation rates, we find that performance of the optimal policy rule can be closely approximated by a very simple rule that targets a weighted average of aggregate wage and price inflation rates. In contrast, some commonly-prescribed policy rules (such as strict5 price inflation targeting and Taylor's rule) perform very poorly in terms of social welfare.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: ECB Working Paper ; No. 179

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Price Level; Inflation; Deflation ; Business Fluctuations; Cycles ; Monetary Policy
• Thema: Geldpolitik ; Dauerhafte Konsumgüter ; Konsumgüter ; VAR-Modell ; Soziale Wohlfahrtsfunktion ; Inflationssteuerung ; Taylor-Regel ; Theorie ; USA

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Erceg, Christopher J. ; Levin, Andrew T.
• Ereignis: Veröffentlichung
• (wer): European Central Bank (ECB)
• (wo): Frankfurt a. M.
• (wann): 2002

Weitere Informationen

• Handle: http://hdl.handle.net/10419/152613
• Letzte Aktualisierung: 10.03.2025, 11:45 MEZ