Optimal Choice of Monetary Policy Instruments in a Simple Stochastic Macro Model

Poole, William

doi:10.2307/1883009

Cited by 1,052 publications

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“…Both academics and policymakers agree that monetary policy is made in an environment of substantial uncertainty regarding current and future economic conditions as well as the functioning of the economy. In this sense, several researches have begun to analyze the implications of uncertainties for monetary policy (Brainard 1967;Friedman, 1968;Poole, 1970;Batini, Martin andBarro andGordon, 1983a, 1983b;rogoff, 1985;Barro, 1986;Lohmann, 1992;Persson and Tabellini, 1993;Taylor, 1993;Walsh, 1995;Bernanke and Mishkin, 1997;Blinder, 1998;Clarida, Gali and Gertler, 1999;Svensson, 1999aSvensson, , 1999bMishkin, 2000;Woodford, 2007. New Keynesians are the theoreticians of Inflation Targeting -which is partly against the New Classical mainstream.…”

Section: Uncertaintymentioning

confidence: 99%

“…This sort of uncertainty appears when policymakers do not know the values of the parameters that enter the model. Influential analyses regarding "parameter uncertainty" were provided by Brainard (1967) and Poole (1970). Both gave attention to uncertainties' implications upon optimal monetary policy, considering the consequences of additive 3 and multiplicative uncertainties.…”

Section: Model or Parameter Uncertaintymentioning

confidence: 99%

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[No Title Available]

Montes

2010

Rev. Econ. Polit.

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This work aims at presenting the challenges that inflation targeting central banks may face since uncertainties represent a harmful element for the effectiveness of monetary policy, and since financial instabilities may disturb the transmission mechanisms -in particular, the expectation channel -and thus the economic stability. Financial stability must not be considered as a simple goal of monetary policy, but a precondition for central banks operate their policies and reach the goals of inflation and output stability. The work identifies different sources of uncertainties that surround central banks' decisions; and approaches the role that inflation targeting central banks should play according to some basic principles that can serve as useful guides for central banks to help them achieve successful outcomes in their conduct of monetary policy.

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Section: Uncertaintymentioning

confidence: 99%

Section: Model or Parameter Uncertaintymentioning

confidence: 99%

[No Title Available]

Montes

2010

Rev. Econ. Polit.

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“…Traditional neo-Keynesian economics eschewed such an approach to policy questions, and instead adopted the idealized construct of the benevolent policy maker who always acted in the public interest. Thus, in the literature on optimal monetary policy initiated by Poole (1970), the Federal Reserve's policy objective function is identified with a social welfare function that fully represents a uniquely defined national interest. New classical macroeconomics has attacked this view, and instead represents the Federal Reserve as following its own private interest, which is different from that of the public interest.…”

Section: The Political Economy Of Deflationary Policy Biasmentioning

confidence: 99%

The Institutionalization of Deflationary Monetary Policy

Palley¹

1997

Money, Financial Institutions and Macroeconomics

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“…The reformulation of Mundell-Fleming model by Poole (1970) indicated that the nature of the shocks -real or monetary, external or internal-determines the role of exchange rates and, consequently, the reasons for choosing a determined exchange rate regime.…”

Section: Introductionmentioning

confidence: 99%

The determinants of the choice of exchange rate regimes in Latin America: a mixed multinomial logit approach

Ondina

Rivero

Queijeiro

et al. 2011

Cuadernos de Economía

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The choice of the exchange rate regime is one of the most signifi cant monetary policy decisions that any economic authority has to make nowadays. Indeed, there have been many studies from a theoretical and empirical point of view, but the only common conclusion would be the lack of consensus. In the past this topic has been modeled by binary probit or cross-sectional multinomial logit models, both of which have weaknesses in the assumptions of the choices. In this paper, such issue is faced by means of a panel mixed multinomial logit model, which allows for substitution pattern among the three types of exchange rate regimes: fi xed, intermediate, and fl exible. Three types of choice determinants are explored: those stated by the Optimum Currency Area (OCA) theory, types of shocks and vulnerability to currency crises, using a sample of 21 Latin American countries over the period 1980-2004. © 2011 Asociación Cuadernos de Economía. Published by Elsevier España, S.L. All rights reserved. Determinantes de la elección del régimen cambiario en América Latina: una aproximación a un modelo logit multinomial mixtoResumen La elección del régimen cambiario constituye una de las decisiones de política económica más relevantes a las que se enfrentan las autoridades monetarias de cualquier país. Existe una amplia literatura, tanto teórica como empírica, cuyo principal resultado es la falta de consenso acerca de los determinantes de la elección del régimen cambiario. Tradicionalmente, este problema se había tratado mediante modelos probit binarios o modelos logit multinomiales de corte transversal, presentando ambos debilidades en la estimación. En este artículo, esta cuestión se afronta mediante un modelo logit multinomial con datos de panel que permite la 56 P. Álvarez Ondina et al.Crisis Cambiarias; Logit multinomial mixto correlación de los errores en el tiempo, así como una mayor fl exibilidad en la elección de las alternativas. Se analizan tres tipos de determinantes en la elección de régimen cambiario: aquellos que se derivan de la teoría de las Áreas Monetarias Óptimas, los relativos a los tipos de shocks y los que se refi eren a la propensión a las crisis cambiarias, utilizando una muestra de 21 países de América Latina para el periodo 1980-2004.

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Optimal Choice of Monetary Policy Instruments in a Simple Stochastic Macro Model

Cited by 1,052 publications

References 0 publications

[No Title Available]

[No Title Available]

The Institutionalization of Deflationary Monetary Policy

The determinants of the choice of exchange rate regimes in Latin America: a mixed multinomial logit approach

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