@techreport{Wieland1999Monetary,
abstract = {Since central banks have limited information concerning the transmission channel of
monetary policy, they are faced with the difficult task of simultaneously controlling the policy
target and estimating the impact of policy actions. A tradeoff between estimation and control
arises because policy actions influence estimation and provide information which may improve
future performance. I analyze this tradeoff in a simple model with parameter uncertainty and
conduct dynamic simulations of the policymaker's decision problem in the presence of the type
of uncertainties that arose in the wake of German reunification. A policy that separates learning
from control may induce a persistent upward bias in money growth and inflation, just as observed
after unification. In contrast, the optimal learning strategy which exploits the tradeoff between
control and estimation significantly improves stabilization performance and reduces the likelihood
of inflationary bias.},
address = {Bonn},
author = {Volker Wieland},
copyright = {http://www.econstor.eu/dspace/Nutzungsbedingungen},
keywords = {E52; E40; D83; C44; 330; optimal control with unknown parameters; Bayesian learning; monetary policy; structural change; learning by doing; inflation targeting},
language = {ger},
number = {B 09-1999},
publisher = {ZEI},
title = {Monetary policy, parameter uncertainty and optimal learning},
type = {ZEI working paper},
url = {http://hdl.handle.net/10419/39532},
year = {1999}
}
