Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/82576
Authors: 
Bask, Mikael
Proaño, Christian R.
Year of Publication: 
2012
Series/Report no.: 
Working Paper, Department of Economics, Uppsala University 2012:7
Abstract: 
We show that a so-called expectations-based optimal monetary policy rule has desirable properties in a standard New Keynesian model augmented with a cost channel and inflation rate expectations that are partly backward-looking. In particular, optimal monetary policy under commitment is associated with a determinate rational expectations equilibrium that is stable under least squares learning for all parameter constellations considered, whereas, under discretion in policy-making, the central bank has to be sufficiently inflation rate averse for the rational expectations equilibrium to have the same properties.
Subjects: 
Commitment
Cost Channel
Determinacy
Discretion
Inflation Inertia
Least Squares Learning
Optimal Monetary Policy
JEL: 
C62
E52
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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