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Simple Monetary Policy Rules Under Model Uncertainty, Ann-Charlotte Eliasson, Peter Isard, Douglas Laxton

Label
Simple Monetary Policy Rules Under Model Uncertainty, Ann-Charlotte Eliasson, Peter Isard, Douglas Laxton
Language
eng
Abstract
Using stochastic simulations and stability analysis, the paper compares how different monetary rules perform in a moderately nonlinear model with a time-varying nonaccelerating-inflation-rate-of-unemployment (NAIRU). Rules that perform well in linear models but implicitly embody backward-looking measures of real interest rates (such as conventional Taylor rules) or substantial interest rate smoothing perform very poorly in models with moderate nonlinearities, particularly when policymakers tend to make serially correlated errors in estimating the NAIRU. This challenges the practice of evaluating rules within linear models, in which the consequences of responding myopically to significant overheating are extremely unrealistic
resource.governmentPublication
international or intergovernmental publication
Literary Form
non fiction
Main title
Simple Monetary Policy Rules Under Model Uncertainty
Nature of contents
dictionaries
Responsibility statement
Ann-Charlotte Eliasson, Peter Isard, Douglas Laxton
Series statement
IMF Working Papers
Content
Other version