EconStor >
Goethe-Universität Frankfurt am Main >
Center for Financial Studies (CFS), Universität Frankfurt a. M.  >
CFS Working Paper Series, Universität Frankfurt a. M. >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/25518
  

Full metadata record

DC FieldValueLanguage
dc.contributor.authorBeck, Günter W.en_US
dc.contributor.authorWieland, Volkeren_US
dc.date.accessioned2007-04-24en_US
dc.date.accessioned2009-07-24T13:48:23Z-
dc.date.available2009-07-24T13:48:23Z-
dc.date.issued2006en_US
dc.identifier.piurn:nbn:de:hebis:30-43980-
dc.identifier.urihttp://hdl.handle.net/10419/25518-
dc.description.abstractThe European Central Bank has assigned a special role to money in its two pillar strategy and has received much criticism for this decision. In this paper, we explore possible justifications. The case against including money in the central bank’s interest rate rule is based on a standard model of the monetary transmission process that underlies many contributions to research on monetary policy in the last two decades. Of course, if one allows for a direct effect of money on output or inflation as in the empirical “two-pillar” Phillips curves estimated in some recent contributions, it would be optimal to include a measure of (long-run) money growth in the rule. In this paper, we develop a justification for including money in the interest rate rule by allowing for imperfect knowledge regarding unobservables such as potential output and equilibrium interest rates. We formulate a novel characterization of ECB-style monetary cross-checking and show that it can generate substantial stabilization benefits in the event of persistent policy misperceptions regarding potential output. Such misperceptions cause a bias in policy setting. We find that cross-checking and changing interest rates in response to sustained deviations of long-run money growth helps the central bank to overcome this bias. Our argument in favor of ECB-style cross-checking does not require direct effects of money on output or inflation.en_US
dc.language.isoengen_US
dc.publisherCenter for Financial Studies Frankfurt, Mainen_US
dc.relation.ispartofseriesCFS Working Paper 2007/17en_US
dc.subject.jelE32en_US
dc.subject.jelE41en_US
dc.subject.jelE43en_US
dc.subject.jelE52en_US
dc.subject.jelE58en_US
dc.subject.ddc330en_US
dc.subject.keywordMonetary Policyen_US
dc.subject.keywordQuantity Theoryen_US
dc.subject.keywordPhillips Curveen_US
dc.subject.keywordEuropean Central Banken_US
dc.subject.keywordPolicy Under Uncertaintyen_US
dc.subject.stwGeldpolitiken_US
dc.subject.stwEntscheidung bei Unsicherheiten_US
dc.subject.stwQuantitätstheorieen_US
dc.subject.stwPhillips-Kurveen_US
dc.subject.stwZentralbanken_US
dc.subject.stwEU-Staatenen_US
dc.titleMoney in monetary policy design under uncertainty: The two-pillar Phillips curve versus ECB-style cross-checkingen_US
dc.typeWorking Paperen_US
dc.identifier.ppn527634603en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungen-
dc.identifier.repecRePEc:zbw:cfswop:200717-
Appears in Collections:CFS Working Paper Series, Universität Frankfurt a. M.

Files in This Item:
File Description SizeFormat
527634603.PDF324.85 kBAdobe PDF
No. of Downloads: Counter Stats
Show simple item record
Download bibliographical data as: BibTeX

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.