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dc.contributor.authorBeck, Guenter W.en_US
dc.contributor.authorWieland, Volkeren_US
dc.date.accessioned2009-10-21en_US
dc.date.accessioned2010-12-15T09:22:16Z-
dc.date.available2010-12-15T09:22:16Z-
dc.date.issued2009en_US
dc.identifier.piurn:nbn:de:hebis:30-71820-
dc.identifier.urihttp://hdl.handle.net/10419/43236-
dc.description.abstractIn the New-Keynesian model, optimal interest rate policy under uncertainty is formulated without reference to monetary aggregates as long as certain standard assumptions on the distributions of unobservables are satisfied. The model has been criticized for failing to explain common trends in money growth and inflation, and that therefore money should be used as a cross-check in policy formulation (see Lucas (2007)). We show that the New-Keynesian model can explain such trends if one allows for the possibility of persistent central bank misperceptions. Such misperceptions motivate the search for policies that include additional robustness checks. In earlier work, we proposed an interest rate rule that is near-optimal in normal times but includes a cross-check with monetary information. In case of unusual monetary trends, interest rates are adjusted. In this paper, we show in detail how to derive the appropriate magnitude of the interest rate adjustment following a significant cross-check with monetary information, when the New-Keynesian model is the central bank's preferred model. The cross-check is shown to be effective in offsetting persistent deviations of inflation due to central bank misperceptions.en_US
dc.language.isoengen_US
dc.publisherCenter for Financial Studies Frankfurt, Mainen_US
dc.relation.ispartofseriesCFS Working Paper 2009/19en_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.keywordNew-Keynesian Modelen_US
dc.subject.keywordMoneyen_US
dc.subject.keywordQuantity Theoryen_US
dc.subject.keywordEuropean Central Banken_US
dc.subject.keywordPolicy Under Uncertaintyen_US
dc.subject.stwGeldpolitiken_US
dc.subject.stwZentralbanken_US
dc.subject.stwEntscheidung bei Unsicherheiten_US
dc.subject.stwZinsen_US
dc.subject.stwUngleichgewichtstheorieen_US
dc.titleMoney in monetary policy design: Monetary cross-checking in the New-Keynesian Modelen_US
dc.typeWorking Paperen_US
dc.identifier.ppn610758462en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
dc.identifier.repecRePEc:zbw:cfswop:200919-
Appears in Collections:CFS Working Paper Series, Universität Frankfurt a. M.

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