Arbeitspapier

Should central banks be more aggressive?

Simple models of monetary policy often imply optimal policy behavior that is considerably more aggressive than what is commonly observed. This paper argues that such counterfactual implications are due to model restrictions and a failure to account for multiplicative parameter uncertainty, rather than to policymakers being too cautious in their implementation of policy. Comparing a restricted and an unrestricted version of the same empirical model, the unrestricted version leads to less volatility in optimal policy, and, taking parameter uncertainty into account, to policy paths very close to actual Federal Reserve policy.

Language
Englisch

Bibliographic citation
Series: Sveriges Riksbank Working Paper Series ; No. 84

Classification
Wirtschaft
Monetary Policy
Central Banks and Their Policies
Subject
Optimal monetary policy
parameter uncertainty
interest rate smoothing

Event
Geistige Schöpfung
(who)
Söderström, Ulf
Event
Veröffentlichung
(who)
Sveriges Riksbank
(where)
Stockholm
(when)
1999

Handle
Last update
10.03.2025, 11:43 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.

Object type

  • Arbeitspapier

Associated

  • Söderström, Ulf
  • Sveriges Riksbank

Time of origin

  • 1999

Other Objects (12)