Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/90810 
Authors: 
Year of Publication: 
2014
Series/Report no.: 
Economics Working Paper No. 2014-03
Publisher: 
Kiel University, Department of Economics, Kiel
Abstract: 
In this we investigate the welfare effects of optimal monetary policy measurements within a high-frequency New-Keynesian model i.e. under variation of the period length. Our results indicate that the policy maker faces a higher welfare loss on a higher relative to a lower frequency of the agents' decision making. While overall inertia in the model increases, we show that the more the pass-through of output gap movements into inflation rate dynamics is dampened on a higher frequency, this amplifies the trade-off of the central bank in case of a cost-push shock. This is caused by the impact of so-called frequency-dependent persistence effects, which mimic the impact of the increase in the amount of market days on the dynamics of the model. This result is less severe in the optimal monetary policy regime under Commitment because of a time-invariant history dependence effect with respect to the period length.
Subjects: 
Hybrid New-Keynesian model
high-frequency modelling
optimal monetary policy
frequency-dependent persistence
JEL: 
C61
C63
E32
E52
Document Type: 
Working Paper

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