Arbeitspapier
Optimal discretionary policy and uncertainty about inflation persistence
This paper studies optimal discretionary policy with parameter uncertainty about inflation inertia. Optimal policy rules and impulse responses are presented within a hybrid New-Keynesian model estimated for the euro area by Smets (2003). We find that it may be optimal for policy to respond more aggressively to cost-push shocks and real interest rate shocks in the presence of uncertainty about inflation inertia, depending on the form of the central bank’s objective function. Moreover, in the cases where optimal policy is not certainty equivalent, we find that inflation returns slightly more gradually to equilibrium following a shock when the degree of inflation inertia is uncertain.
- Language
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Englisch
- Bibliographic citation
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Series: ECB Working Paper ; No. 540
- Classification
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Wirtschaft
Monetary Policy
Central Banks and Their Policies
- Subject
-
Inflation persistence
monetary policy
uncertainty
Inflation
Geldpolitik
Risiko
Theorie
- Event
-
Geistige Schöpfung
- (who)
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Moessner, Richhild
- Event
-
Veröffentlichung
- (who)
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European Central Bank (ECB)
- (where)
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Frankfurt a. M.
- (when)
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2005
- Handle
- Last update
-
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
- Moessner, Richhild
- European Central Bank (ECB)
Time of origin
- 2005
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