Can monetary policy survive policy model mis-specification? Model uncertainty and the perils of “policy model complacency”

2017 ◽  
Vol 69 (1) ◽  
pp. 2-15 ◽  
Author(s):  
Mark Setterfield
Keyword(s):  
Monetary Policy ◽  
Model Uncertainty ◽  
Policy Model

scholarly journals Monetary Policy in the Post Keynesian Theoretical Framework

2017 ◽  
Vol 37 (1) ◽  
pp. 45-64
Author(s):  
FÁBIO HENRIQUE BITTES TERRA ◽  
PHILIP ARESTIS
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Inflation Targeting ◽  
Debt Management ◽  
Policy Framework ◽  
Original Writings ◽  
Policy Model ◽  
Original Contribution ◽  
The Interest Rate ◽  
Monetary Policy Framework

ABSTRACT The purpose of this contribution is to develop a Post Keynesian monetary policy model, presenting its goals, tools, and channels. The original contribution this paper develops, following (Keynes’s 1936, 1945) proposals, is the use of debt management as an instrument of monetary policy, along with the interest rate and regulation. Moreover, this paper draws its monetary policy model by broadly and strongly relying on Keynes’s original writings. A monetary policy model erected upon this basis relates itself directly to the Post Keynesian efforts to offer a monetary policy framework substantially different from the Inflation Targeting Regime of the New Macroeconomic Consensus.

Habit Formation in Consumption and Its Implications for Monetary-Policy Models

2000 ◽  
Vol 90 (3) ◽  
pp. 367-390 ◽  
Author(s):  
Jeffrey C Fuhrer
Keyword(s):  
Monetary Policy ◽  
Habit Formation ◽  
Formation Model ◽  
Policy Model ◽  
Current Consumption ◽  
Policy Models ◽  
Empirical Tests

This paper explores a monetary-policy model with habit formation for consumers, in which consumers' utility depends in part on current consumption relative to past consumption. The empirical tests developed in the paper show that one can reject the hypothesis of no habit formation with tremendous confidence, largely because the habit-formation model captures the gradual hump-shaped response of real spending to various shocks. The paper then embeds the habit-consumption specification in a monetary-policy model and finds that the responses of both spending and inflation to monetary-policy actions are significantly improved by this modification. (JEL D12, E52, E43)

scholarly journals A two-pillar DSGE monetary policy model for the euro area

2011 ◽  
Vol 28 (3) ◽  
pp. 1303-1316 ◽  
Author(s):  
Jean Barthélemy ◽  
Laurent Clerc ◽  
Magali Marx
Keyword(s):  
Monetary Policy ◽  
Euro Area ◽  
Policy Model

scholarly journals A Two-Pillar DSGE Monetary Policy Model for the Euro Area

2008 ◽  
Author(s):  
Jean Barthelemy ◽  
Laurent Clerc ◽  
Magali Marx
Keyword(s):  
Monetary Policy ◽  
Euro Area ◽  
Policy Model

Asset Price and the Optimal Monetary Policy: Model and Simulation

2011 ◽  
Vol 422 ◽  
pp. 466-469
Author(s):  
Hai Cheng Peng ◽  
Lu Li
Keyword(s):  
Monetary Policy ◽  
Asset Price ◽  
Price Volatility ◽  
Reaction Function ◽  
Optimal Monetary Policy ◽  
Policy Objective ◽  
Policy Model ◽  
Model And Simulation ◽  
Wide Range ◽  
Decision Making Model

The validity and merits of the monetary policy is reflected in the level of the attainment of its ultimate goal. We build up a decision-making model of central bank and deduce the optimal money supply reaction function of considering and ignoring asset price. In order to clarify the relationship between the optimal monetary policy and asset price volatility, we simulate the macroeconomic performance of optimal reaction function of considering and ignoring asset price in a wide range of monetary policy objective. We conclude that monetary policy should respond to volatility of asset price directly.

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