Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/60805 
Year of Publication: 
2012
Series/Report no.: 
Staff Report No. 546
Publisher: 
Federal Reserve Bank of New York, New York, NY
Abstract: 
This paper compares the properties of interest rate rules such as simple Taylor rules and rules that respond to price-level fluctuations - called Wicksellian rules - in a basic forward-looking model. By introducing appropriate history dependence in policy, Wicksellian rules perform better than optimal Taylor rules in terms of welfare and robustness to alternative shock processes, and they are less prone to equilibrium indeterminacy. A simple Wicksellian rule augmented with a high degree of interest rate inertia resembles a robustly optimal rule - that is, a monetary policy rule that implements the optimal plan and is also completely robust to the specification of exogenous shock processes.
Subjects: 
optimal monetary policy
Taylor rule
robust policy
JEL: 
E30
E31
E52
E58
Document Type: 
Working Paper

Files in This Item:
File
Size
405.25 kB





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