Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153151
Authors: 
Sauer, Stephan
Year of Publication: 
2007
Series/Report no.: 
ECB Working Paper 717
Abstract: 
Discretionary monetary policy produces a dynamic loss in the New Keynesian model in the presence of cost-push shocks. The possibility to commit to a specific policy rule can increase welfare. A number of authors since Woodford (1999) have argued in favour of a timeless perspective rule as an optimal policy. The short-run costs associated with the timeless perspective are neglected in general, however. Rigid prices, relatively impatient households, a high preference of policy makers for output stabilisation and a deviation from the steady state all worsen the performance of the timeless perspective rule and can make it inferior to discretion.
Subjects: 
Optimality
Policy rules
Timeless perspective
JEL: 
E5
Document Type: 
Working Paper

Files in This Item:
File
Size





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