Optimal Monetary Policy Under Uncertainty In Dsge Models
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| Author | : Davide Debortoli |
| Publisher | : International Monetary Fund |
| Total Pages | : 56 |
| Release | : 2017-07-21 |
| Genre | : Business & Economics |
| ISBN | : 1484311752 |
Yes, it makes a lot of sense. This paper studies how to design simple loss functions for central banks, as parsimonious approximations to social welfare. We show, both analytically and quantitatively, that simple loss functions should feature a high weight on measures of economic activity, sometimes even larger than the weight on inflation. Two main factors drive our result. First, stabilizing economic activity also stabilizes other welfare relevant variables. Second, the estimated model features mitigated inflation distortions due to a low elasticity of substitution between monopolistic goods and a low interest rate sensitivity of demand. The result holds up in the presence of measurement errors, with large shocks that generate a trade-off between stabilizing inflation and resource utilization, and also when ensuring a low probability of hitting the zero lower bound on interest rates.
| Author | : Richard T. Froyen |
| Publisher | : Edward Elgar Publishing |
| Total Pages | : 432 |
| Release | : 2019 |
| Genre | : Electronic books |
| ISBN | : 1784717193 |
This book provides a thorough survey of the model-based literature on optimal monetary in a stochastic setting. The survey begins with the literature of the 1970s which focused on the information problem in policy design and extends to the New Keynesian approach of the 1990s which centered on evaluating alternative targeting strategies. New to the second edition is consideration of research since the world financial crisis on the role of financial markets and institutions in the conduct of monetary policy.
| Author | : Jonathan Benchimol |
| Publisher | : International Monetary Fund |
| Total Pages | : 52 |
| Release | : 2019-08-02 |
| Genre | : Business & Economics |
| ISBN | : 1498324584 |
The form of bounded rationality characterizing the representative agent is key in the choice of the optimal monetary policy regime. While inflation targeting prevails for myopia that distorts agents' inflation expectations, price level targeting emerges as the optimal policy under myopia regarding the output gap, revenue, or interest rate. To the extent that bygones are not bygones under price level targeting, rational inflation expectations is a minimal condition for optimality in a behavioral world. Instrument rules implementation of this optimal policy is shown to be infeasible, questioning the ability of simple rules à la Taylor (1993) to assist the conduct of monetary policy. Bounded rationality is not necessarily associated with welfare losses.
| Author | : Norman Loayza |
| Publisher | : |
| Total Pages | : 494 |
| Release | : 2002 |
| Genre | : Monetary policy |
| ISBN | : |
| Author | : Mr.Jaromir Benes |
| Publisher | : International Monetary Fund |
| Total Pages | : 59 |
| Release | : 2014-04-04 |
| Genre | : Business & Economics |
| ISBN | : 1475524986 |
This paper presents the theoretical structure of MAPMOD, a new IMF model designed to study vulnerabilities associated with excessive credit expansions, and to support macroprudential policy analysis. In MAPMOD, bank loans create purchasing power that facilitates adjustments in the real economy. But excessively large and risky loans can impair balance sheets and sow the seeds of a financial crisis. Banks respond to losses through higher spreads and rapid credit cutbacks, with adverse effects for the real economy. These features allow the model to capture the basic facts of financial cycles. A companion paper studies the simulation properties of MAPMOD.
| Author | : Mr.Pau Rabanal |
| Publisher | : International Monetary Fund |
| Total Pages | : 38 |
| Release | : 2009-11-01 |
| Genre | : Business & Economics |
| ISBN | : 1451873980 |
We argue that a stronger emphasis on macrofinancial risk could provide stabilization benefits. Simulations results suggest that strong monetary reactions to accelerator mechanisms that push up credit growth and asset prices could help macroeconomic stability. In addition, using a macroprudential instrument designed specifically to dampen credit market cycles would also be useful. But invariant and rigid policy responses raise the risk of policy errors that could lower, not raise, macroeconomic stability. Hence, discretion would be required.
| Author | : Nathan Balke |
| Publisher | : Emerald Group Publishing |
| Total Pages | : 480 |
| Release | : 2012-11-29 |
| Genre | : Business & Economics |
| ISBN | : 1781903069 |
This volume of Advances in Econometrics contains articles that examine key topics in the modeling and estimation of dynamic stochastic general equilibrium (DSGE) models. Because DSGE models combine micro- and macroeconomic theory with formal econometric modeling and inference, over the past decade they have become an established framework for analy
| Author | : Edward P. Herbst |
| Publisher | : Princeton University Press |
| Total Pages | : 295 |
| Release | : 2015-12-29 |
| Genre | : Business & Economics |
| ISBN | : 0691161089 |
Dynamic stochastic general equilibrium (DSGE) models have become one of the workhorses of modern macroeconomics and are extensively used for academic research as well as forecasting and policy analysis at central banks. This book introduces readers to state-of-the-art computational techniques used in the Bayesian analysis of DSGE models. The book covers Markov chain Monte Carlo techniques for linearized DSGE models, novel sequential Monte Carlo methods that can be used for parameter inference, and the estimation of nonlinear DSGE models based on particle filter approximations of the likelihood function. The theoretical foundations of the algorithms are discussed in depth, and detailed empirical applications and numerical illustrations are provided. The book also gives invaluable advice on how to tailor these algorithms to specific applications and assess the accuracy and reliability of the computations. Bayesian Estimation of DSGE Models is essential reading for graduate students, academic researchers, and practitioners at policy institutions.
| Author | : Kenneth S. Rogoff |
| Publisher | : MIT Press |
| Total Pages | : 479 |
| Release | : 2006-04 |
| Genre | : Business & Economics |
| ISBN | : 0262072726 |
The 20th NBER Macroeconomics Annual, covering questions at the cutting edge of macroeconomics that are central to current policy debates.
| Author | : Jordi Galí |
| Publisher | : University of Chicago Press |
| Total Pages | : 663 |
| Release | : 2010-03-15 |
| Genre | : Business & Economics |
| ISBN | : 0226278875 |
United States monetary policy has traditionally been modeled under the assumption that the domestic economy is immune to international factors and exogenous shocks. Such an assumption is increasingly unrealistic in the age of integrated capital markets, tightened links between national economies, and reduced trading costs. International Dimensions of Monetary Policy brings together fresh research to address the repercussions of the continuing evolution toward globalization for the conduct of monetary policy. In this comprehensive book, the authors examine the real and potential effects of increased openness and exposure to international economic dynamics from a variety of perspectives. Their findings reveal that central banks continue to influence decisively domestic economic outcomes—even inflation—suggesting that international factors may have a limited role in national performance. International Dimensions of Monetary Policy will lead the way in analyzing monetary policy measures in complex economies.
