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Title:Rational Expectations Models with Anticipated Shocks and Optimal Policy PDF Logo
Authors:Winkler, Roland
Wohltmann, Hans-Werner
Issue Date:2012
Series/Report no.:Beiträge zur Jahrestagung des Vereins für Socialpolitik 2012: Neue Wege und Herausforderungen für den Arbeitsmarkt des 21. Jahrhunderts - Session: Information and the Macroeconomy C18-V3
Abstract:This paper investigates optimal policy in the presence of anticipated (or news) shocks. We determine the optimal unrestricted and restricted policy response in a general rational expectations model and show that, if shocks are news shocks, the optimal unrestricted control rule under commitment contains a forward-looking element. As an example, we lay out a micro-founded hybrid New Keynesian model and show i) that anticipated cost-push shocks entail higher welfare losses than unanticipated shocks of equal size and ii) that the inclusion of forward-looking elements enhances distinctly the performance of simple optimized interest rate rules.
JEL:E52
E32
C61
Document Type:Conference Paper
Appears in Collections:Jahrestagung des Vereins für Socialpolitik 2012: Neue Wege und Herausforderungen für den Arbeitsmarkt des 21. Jh.

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