Unconditionally optimal monetary policy

Damjanovic, Tatiana; Damjanovic, Vladislav; Nolan, Charles R.

doi:10.1016/j.jmoneco.2008.01.003

Cited by 17 publications

(3 citation statements)

References 17 publications

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“…Furthermore, for large enough values of the ωb j a −1 β − j terms, the timelessperspective policy can even yield a larger unconditional expected loss than the optimal 6. Damjanovic, Damjanovic, and Nolan (2008a) show how optimal unconditional continuation rules can be derived algebraically. 7.…”

Section: Unconditional Objectivementioning

confidence: 99%

Optimal Continuation versus the Timeless Perspective in Monetary Policy

Jensen¹,

McCallum²

2010

J of Money Credit Banking

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The timeless-perspective approach suggests that policymakers implement in each period policy actions conforming to a rule that would have been fully optimal to adopt in the distant past. A motivating advantage is that policy henceforth would continue by recommending the same optimality conditions if reconsidered, thereby enhancing credibility. We argue that continuation can alternatively be achieved with better results, on average, in terms of policymakers' objectives, by implementing in each period the time-invariant policy that is optimal from the viewpoint of the contemporary understanding of objectives and constraints, but while ignoring the conditions that happen to prevail at the time. Copyright (c) 2010 The Ohio State University.

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Section: Unconditional Objectivementioning

confidence: 99%

Optimal Continuation versus the Timeless Perspective in Monetary Policy

Jensen¹,

McCallum²

2010

J of Money Credit Banking

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“…Schmitt-Grohe and Uribe (2007) compare conditional and unconditional measures at the optimal policy in a similar NK model and find only small differences between the two. See also Damjanovic et al (2008Damjanovic et al ( , 2015 and Kim and Kim (2018) for an analysis of optimal policy in general, not confined to simple rules, using conditional, unconditional and timeless criteria. 19 This is implemented in a Dynare program that calls a matlab subroutine fmincon that finds a constrained minimum of a function of several variables.…”

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confidence: 99%

Simple mandates, monetary rules, and trend-inflation

2023

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A mandate framework is proposed for delegating monetary policy to an instrument-independent, but goal-dependent central bank that emphasizes simplicity in both the objectives entering the welfare criterion and those in the instrument rule. It consists of: (i) a simple quadratic loss function penalizing deviations from target variables; (ii) a welfare-optimized, Taylor-type log-linear nominal interest-rate rule with targets that match those in the loss function; (iii) a zero-lower-bound (ZLB) constraint on the nominal interest rate imposing a low unconditional probability of ZLB episodes; and (iv) a long-run inflation target. In an estimated New Keynesian model with these features, we find that for a quarterly probability of 5%, an optimal annual inflation target is close to 2%, weights for real variables in the loss function are small compared with inflation except for the real wage growth mandate and the optimized rules mimic a price-level rule.

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“…The outer government will choose promises to maximise the unconditional expectation of the inner government's problem. We use the same technique as Damjanovic, Damjanovic and Nolan (2008) to obtain the …rst order condition with respect ! t .…”

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confidence: 99%

Unconditionally optimal Ramsey policy

Damjanovic

Nolan

2021

Journal of Macroeconomics

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Unconditionally optimal monetary policy

Cited by 17 publications

References 17 publications

Optimal Continuation versus the Timeless Perspective in Monetary Policy

Optimal Continuation versus the Timeless Perspective in Monetary Policy

Simple mandates, monetary rules, and trend-inflation

Unconditionally optimal Ramsey policy

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