Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/153564 
Year of Publication: 
2009
Series/Report no.: 
ECB Working Paper No. 1130
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
I estimate a dynamic stochastic general equilibrium model where the policymaker and the private sector have imperfect knowledge about potential output. The estimation of the structural parameters and of the monetary authorities’objectives is key to assess the quantitative relevance of the imperfect information problem and to evaluate the robustness of previous exercises based on calibration. The estimated model also allows me to revisit the Orphanides (2001, 2003) findings that the central bank can makes large and persistent mistakes to estimate potential output in response to productivity and cost shocks. I find that when real unit labor cost is used as a monetary policy indicator, the potential output uncertainty has quantitatively negligible consequences on policy behaviour and inflation dynamics.
Subjects: 
indicator variables
monetary policy
potential output uncertainty
real unit labor cost
JEL: 
E4
E5
Document Type: 
Working Paper

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