Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/277764 
Year of Publication: 
2023
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 12/2023
Publisher: 
Bank of Finland, Helsinki
Abstract: 
Optimal monetary policy studies typically rely on a single structural model and identification of model-specific rules that minimize the unconditional volatilities of inflation and real activity. In our proposed approach, we take a large set of structural models and look for the model-robust rules that minimize the volatilities at those frequencies that policymakers are most interested in stabilizing. Compared to the status quo approach, our results suggest that policymakers should be more restrained in their inflation responses when their aim is to stabilize inflation and output growth at specific frequencies. Additional caution is called for due to model uncertainty.
Subjects: 
monetary policy rules
policy evaluation
model comparison
model uncertainty
frequency domain
design limits
DSGE models
JEL: 
C49
E32
E37
E52
E58
ISBN: 
978-952-323-445-1
Document Type: 
Working Paper

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