scholarly journals Optimal Simple Monetary Policy Rules and Non-Atomistic Wage Setters in a New-Keynesian Framework

2006 ◽  
Author(s):  
Stefano Gnocchi
Keyword(s):  
Monetary Policy ◽  
New Keynesian ◽  
Policy Rules ◽  
Monetary Policy Rules

A NOTE ON TREND GROWTH AND LEARNING ABOUT MONETARY POLICY RULES IN A TWO-BLOCK WORLD ECONOMY

2015 ◽  
Vol 21 (1) ◽  
pp. 243-258
Author(s):  
Eric Schaling ◽  
Mewael F. Tesfaselassie
Keyword(s):  
Monetary Policy ◽  
Rational Expectations ◽  
World Economy ◽  
New Keynesian ◽  
Policy Rules ◽  
Monetary Policy Rules ◽  
Elasticity Of Intertemporal Substitution ◽  
Keynesian Model ◽  
Long Run ◽  
Trend Growth

We analyze the implications of openness and growth for determinacy and learnability of rational expectations equilibria in a two-country New Keynesian model with alternative monetary policy rules. Under the contemporaneous data rule, the conditions for determinacy and learnability become more stringent as a result of openness but less stringent as a result of growth, so that growth weakens the effect of openness. Under the expectations-based rule, the conditions for determinacy and learnability also become more stringent as a result of openness, whereas as a result of trend growth the conditions for determinacy also become more stringent (thus reinforcing the effect of openness) but those for learnability become less stringent (thus weakening the effect of openness). As in related studies, the elasticity of intertemporal substitution is key to our result, but within a framework that is consistent with long-run labor supply and balanced growth facts.

scholarly journals The Science of Monetary Policy: A New Keynesian Perspective

1999 ◽  
Vol 37 (4) ◽  
pp. 1661-1707 ◽  
Author(s):  
Richard Clarida ◽  
Jordi Galí ◽  
Mark Gertler
Keyword(s):  
Monetary Policy ◽  
Real World ◽  
Imperfect Information ◽  
Inflation Targeting ◽  
Recent Literature ◽  
Policy Design ◽  
New Keynesian ◽  
Credible Commitment ◽  
Policy Rules ◽  
Monetary Policy Rules

The paper reviews the recent literature on monetary policy rules. We exposit the monetary policy design problem within a simple baseline theoretical framework. We then consider the implications of adding various real world complications. Among other things, we show that the optimal policy implicitly incorporates inflation targeting. We also characterize the gains from making a credible commitment to fight inflation. In contrast to conventional wisdom, we show that gains from commitment may emerge even if the central bank is not trying to inadvisedly push output above its natural level. We also consider the implications of frictions such as imperfect information.

scholarly journals Welfare Implications of Alternative Monetary Policy Rules: A New Keynesian DSGE Model for Turkey

2017 ◽  
Vol 17 (4) ◽  
pp. 363-379
Author(s):  
Özge Filiz Yağcıbaşı ◽  
Mustafa Ozan Yıldırım
Keyword(s):  
Monetary Policy ◽  
Loss Function ◽  
Inflation Targeting ◽  
New Keynesian ◽  
Demand Shock ◽  
Policy Rules ◽  
Monetary Policy Rules ◽  
Output Fluctuations ◽  
Turkish Economy ◽  
Technology Shock

Abstract In recent years, there has been extensive research on the conduct of monetary policy in small open economies that are subject to inflation and output fluctuations. Policymakers should decide whether to implement strict inflation targeting or to respond to the changes in output fluctuations while conducting monetary policy rule. This study aims to examine the response of alternative monetary policy rules to Turkish economy by means of a DSGE model that is subject to demand and technology shocks. The New Keynesian model we used is borrowed from Gali (2015) and calibrated for the Turkish economy. Welfare effects of alternative Taylor rules are evaluated under different specifications of central bank loss function. One of the main findings of this paper is that in the case of a technology shock, strict inflation targeting rules provide the minimum welfare loss under all loss function configurations. On the contrary, the losses are weakened if the monetary authority responds to output fluctuations in the presence of a demand shock. Finally, there exists a trade-off between the volatility of output and inflation in case of a technology shock, while the volatility of both variables moves in the same direction in response to a demand shock.

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