scholarly journals Optimal Monetary Policy in Inflation Targeting Open Economies

2018 ◽  
Vol 48 (1) ◽  
pp. 12122 ◽  
Author(s):  
Anthony J. Makin
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Open Economies ◽  
Optimal Monetary Policy

INNOVATION, GROWTH, AND OPTIMAL MONETARY POLICY

2019 ◽  
pp. 1-24
Author(s):  
Barbara Annicchiarico ◽  
Alessandra Pelloni
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Public Spending ◽  
New Keynesian ◽  
Positive Trend ◽  
Policy Recommendation ◽  
Optimal Monetary Policy ◽  
Keynesian Model ◽  
Trend Inflation ◽  
Short Run

This paper examines how innovation-led growth affects optimal monetary policy. We consider the Ramsey policy in a New Keynesian model where R&D leads to an expanding variety of intermediate goods and compare the results with those obtained when the expansion occurs exogenously. Positive trend inflation is found to be optimal under both assumptions, but much higher with profit-seeking innovation. Optimal monetary policy must be counter-cyclical in response to both technology and public spending shocks, yet the intensity of the reaction crucially depends on the presence of an R&D sector. However, the small amount of short-run deviations of prices from the non-zero trend inflation observed in response to shocks suggests inflation targeting as a robust policy recommendation.

Delegating Optimal Monetary Policy Inertia in a Small-Open Economy

2020 ◽  
Vol 0 (0) ◽  
Author(s):  
Daisuke Ida ◽  
Mitsuhiro Okano
Keyword(s):  
Monetary Policy ◽  
Open Economy ◽  
Inflation Targeting ◽  
Small Open Economy ◽  
Central Banks ◽  
New Keynesian ◽  
Closed Economy ◽  
Optimal Monetary Policy ◽  
Nk Model ◽  
Exchange Rate Targeting

AbstractThis paper explores the delegation of several targeting regimes in a small open new Keynesian (NK) model and examines how central banks overcome stabilization bias in a small open NK model. Results indicate that both speed limit and real exchange rate targeting can carry the isomorphic properties of optimal monetary policy over to the closed economy. In addition, neither nominal income growth targeting nor CPI inflation targeting replicates a commitment policy. These findings provide new implications for optimal monetary policy in an open economy.

scholarly journals Optimal Monetary Policy in Open Economies

2010 ◽  
pp. 1.000-91.000 ◽  
Author(s):  
Giancarlo Corsetti ◽  
◽  
Luca Dedola ◽  
Sylvain Leduc ◽  
◽  
...  
Keyword(s):  
Monetary Policy ◽  
Open Economies ◽  
Optimal Monetary Policy

scholarly journals Optimal Monetary Policy in Open Economies

2010 ◽  
pp. 861-933 ◽  
Author(s):  
Giancarlo Corsetti ◽  
Luca Dedola ◽  
Sylvain Leduc
Keyword(s):  
Monetary Policy ◽  
Open Economies ◽  
Optimal Monetary Policy

SECTORAL DIFFERENCES IN PRICE-ADJUSTMENT FREQUENCIES AND OPTIMAL MONETARY POLICY: A NOTE

2013 ◽  
Vol 19 (3) ◽  
pp. 708-722
Author(s):  
Engin Kara
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Monetary Economics ◽  
Policy Implications ◽  
Price Adjustment ◽  
Model Parameters ◽  
Optimal Monetary Policy ◽  
Consumer Prices ◽  
Sectoral Differences ◽  
Producer Prices

This paper reconsiders the monetary policy implications of a model from which a distinction between CPI inflation and PPI inflation arises. More specifically, this paper addresses the policy conclusion by K. Huang and Z. Liu [2005, Inflation targeting: What inflation rate to target, Journal of Monetary Economics 52, 1435–1462], which states that central banks should use an optimal inflation index that gives substantial weight to stabilizing both CPI and PPI. This paper argues that these authors' findings rely on the assumption that producer prices are as sticky as consumer prices and shows that once empirically relevant frequencies of price adjustment are used to calibrate the model, CPI inflation receives substantial weight in the optimal inflation index. Moreover, this rule is remarkably robust to uncertainty regarding the model parameters.

Optimal Monetary Policy

1998 ◽  
Vol 164 ◽  
pp. 100-109 ◽  
Author(s):  
Andrew P. Blake ◽  
Martin Weale ◽  
Garry Young
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Policy Design ◽  
Policy Framework ◽  
Optimal Monetary Policy ◽  
Long Run ◽  
Short Run ◽  
The Interest Rate ◽  
Feedback Rule ◽  
Simple Feedback

In this article we propose a policy framework for inflation targeting that contains elements of both optimal and simple rules. We use a simple feedback rule for the interest rate to look after monetary policy in the long run whilst using optimal control in the short run to determine appropriate responses to shocks. The composite policy is capable of substantial welfare improvements over using a simple rule alone whilst maintaining tractability. We see the use of such a framework together with a fully specified model as a feasible approach to practical policy design.

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