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Inflation Output Variance Trade Offs And Optimal Monetary Policy
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Book Synopsis The Inflation-Targeting Debate by : Ben S. Bernanke
Download or read book The Inflation-Targeting Debate written by Ben S. Bernanke and published by University of Chicago Press. This book was released on 2007-11-01 with total page 469 pages. Available in PDF, EPUB and Kindle. Book excerpt: Over the past fifteen years, a significant number of industrialized and middle-income countries have adopted inflation targeting as a framework for monetary policymaking. As the name suggests, in such inflation-targeting regimes, the central bank is responsible for achieving a publicly announced target for the inflation rate. While the objective of controlling inflation enjoys wide support among both academic experts and policymakers, and while the countries that have followed this model have generally experienced good macroeconomic outcomes, many important questions about inflation targeting remain. In Inflation Targeting, a distinguished group of contributors explores the many underexamined dimensions of inflation targeting—its potential, its successes, and its limitations—from both a theoretical and an empirical standpoint, and for both developed and emerging economies. The volume opens with a discussion of the optimal formulation of inflation-targeting policy and continues with a debate about the desirability of such a model for the United States. The concluding chapters discuss the special problems of inflation targeting in emerging markets, including the Czech Republic, Poland, and Hungary.
Book Synopsis Designing a Simple Loss Function for Central Banks by : Davide Debortoli
Download or read book Designing a Simple Loss Function for Central Banks written by Davide Debortoli and published by International Monetary Fund. This book was released on 2017-07-21 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Why Inflation Targeting? by : Charles Freedman
Download or read book Why Inflation Targeting? written by Charles Freedman and published by International Monetary Fund. This book was released on 2009-04-01 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: This is the second chapter of a forthcoming monograph entitled "On Implementing Full-Fledged Inflation-Targeting Regimes: Saying What You Do and Doing What You Say." We begin by discussing the costs of inflation, including their role in generating boom-bust cycles. Following a general discussion of the need for a nominal anchor, we describe a specific type of monetary anchor, the inflation-targeting regime, and its two key intellectual roots-the absence of long-run trade-offs and the time-inconsistency problem. We conclude by providing a brief introduction to the way in which inflation targeting works.
Book Synopsis Optimal Monetary Policy Under Bounded Rationality by : Jonathan Benchimol
Download or read book Optimal Monetary Policy Under Bounded Rationality written by Jonathan Benchimol and published by International Monetary Fund. This book was released on 2019-08-02 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis International Dimensions of Monetary Policy by : Jordi Galí
Download or read book International Dimensions of Monetary Policy written by Jordi Galí and published by University of Chicago Press. This book was released on 2010-03-15 with total page 663 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Monetary Policy Rules by : John B. Taylor
Download or read book Monetary Policy Rules written by John B. Taylor and published by University of Chicago Press. This book was released on 2007-12-01 with total page 460 pages. Available in PDF, EPUB and Kindle. Book excerpt: This timely volume presents the latest thinking on the monetary policy rules and seeks to determine just what types of rules and policy guidelines function best. A unique cooperative research effort that allowed contributors to evaluate different policy rules using their own specific approaches, this collection presents their striking findings on the potential response of interest rates to an array of variables, including alterations in the rates of inflation, unemployment, and exchange. Monetary Policy Rules illustrates that simple policy rules are more robust and more efficient than complex rules with multiple variables. A state-of-the-art appraisal of the fundamental issues facing the Federal Reserve Board and other central banks, Monetary Policy Rules is essential reading for economic analysts and policymakers alike.
Book Synopsis The Taylor Rule and the Transformation of Monetary Policy by : Robert Leeson
Download or read book The Taylor Rule and the Transformation of Monetary Policy written by Robert Leeson and published by Hoover Press. This book was released on 2013-09-01 with total page 368 pages. Available in PDF, EPUB and Kindle. Book excerpt: A contributors' "who's who" from the academic and policy communities explain and provide perspectives on John Taylor's revolutionary thinking about monetary policy. They explore some of the literature that Taylor inspired and help us understand how the new ways of thinking that he pioneered have influenced actual policy here and abroad.
Book Synopsis Inflation Targeting and Output Stability by : Mr.Esteban Jadresic
Download or read book Inflation Targeting and Output Stability written by Mr.Esteban Jadresic and published by International Monetary Fund. This book was released on 1999-04-01 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper reexamines the effects of inflation targeting on output stability. It considers an economy with staggered price setting that is exposed to price shocks and where the policymaker cannot observe the current realizations of aggregate output and inflation. The paper shows that, if some price shocks can be anticipated, the effects of inflation targeting depend critically on the inflation indicator being targeted. Specifically, targeting headline inflation can severely destabilize output, while targeting inflation indicator of sticky prices may eliminate that problem and make the response of the output gap to aggregate shocks short-lived.
Book Synopsis The Great Inflation by : Michael D. Bordo
Download or read book The Great Inflation written by Michael D. Bordo and published by University of Chicago Press. This book was released on 2013-06-28 with total page 545 pages. Available in PDF, EPUB and Kindle. Book excerpt: Controlling inflation is among the most important objectives of economic policy. By maintaining price stability, policy makers are able to reduce uncertainty, improve price-monitoring mechanisms, and facilitate more efficient planning and allocation of resources, thereby raising productivity. This volume focuses on understanding the causes of the Great Inflation of the 1970s and ’80s, which saw rising inflation in many nations, and which propelled interest rates across the developing world into the double digits. In the decades since, the immediate cause of the period’s rise in inflation has been the subject of considerable debate. Among the areas of contention are the role of monetary policy in driving inflation and the implications this had both for policy design and for evaluating the performance of those who set the policy. Here, contributors map monetary policy from the 1960s to the present, shedding light on the ways in which the lessons of the Great Inflation were absorbed and applied to today’s global and increasingly complex economic environment.
Book Synopsis Monetary Theory and Policy, third edition by : Carl E. Walsh
Download or read book Monetary Theory and Policy, third edition written by Carl E. Walsh and published by MIT Press. This book was released on 2010-02-12 with total page 639 pages. Available in PDF, EPUB and Kindle. Book excerpt: A new edition of the leading text in monetary economics, a comprehensive treatment revised and enhanced with new material reflecting recent advances in the field. This text presents a comprehensive treatment of the most important topics in monetary economics, focusing on the primary models monetary economists have employed to address topics in theory and policy. It covers the basic theoretical approaches, shows how to do simulation work with the models, and discusses the full range of frictions that economists have studied to understand the impacts of monetary policy. Among the topics presented are money-in-the-utility function, cash-in-advance, and search models of money; informational, portfolio, and nominal rigidities; credit frictions; the open economy; and issues of monetary policy, including discretion and commitment, policy analysis in new Keynesian models, and monetary operating procedures. The use of models based on dynamic optimization and nominal rigidities in consistent general equilibrium frameworks, relatively new when introduced to students in the first edition of this popular text, has since become the method of choice of monetary policy analysis. This third edition reflects the latest advances in the field, incorporating new or expanded material on such topics as monetary search equilibria, sticky information, adaptive learning, state-contingent pricing models, and channel systems for implementing monetary policy. Much of the material on policy analysis has been reorganized to reflect the dominance of the new Keynesian approach. Monetary Theory and Policy continues to be the only comprehensive and up-to-date treatment of monetary economics, not only the leading text in the field but also the standard reference for academics and central bank researchers.
Book Synopsis Monetary and Macroprudential Policy with Endogenous Risk by : Tobias Adrian
Download or read book Monetary and Macroprudential Policy with Endogenous Risk written by Tobias Adrian and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Inflation Expectations by : Peter J. N. Sinclair
Download or read book Inflation Expectations written by Peter J. N. Sinclair and published by Routledge. This book was released on 2009-12-16 with total page 402 pages. Available in PDF, EPUB and Kindle. Book excerpt: Inflation is regarded by the many as a menace that damages business and can only make life worse for households. Keeping it low depends critically on ensuring that firms and workers expect it to be low. So expectations of inflation are a key influence on national economic welfare. This collection pulls together a galaxy of world experts (including Roy Batchelor, Richard Curtin and Staffan Linden) on inflation expectations to debate different aspects of the issues involved. The main focus of the volume is on likely inflation developments. A number of factors have led practitioners and academic observers of monetary policy to place increasing emphasis recently on inflation expectations. One is the spread of inflation targeting, invented in New Zealand over 15 years ago, but now encompassing many important economies including Brazil, Canada, Israel and Great Britain. Even more significantly, the European Central Bank, the Bank of Japan and the United States Federal Bank are the leading members of another group of monetary institutions all considering or implementing moves in the same direction. A second is the large reduction in actual inflation that has been observed in most countries over the past decade or so. These considerations underscore the critical – and largely underrecognized - importance of inflation expectations. They emphasize the importance of the issues, and the great need for a volume that offers a clear, systematic treatment of them. This book, under the steely editorship of Peter Sinclair, should prove very important for policy makers and monetary economists alike.
Book Synopsis Monetary Policy Strategies by : International Monetary Fund
Download or read book Monetary Policy Strategies written by International Monetary Fund and published by International Monetary Fund. This book was released on 1988-10-04 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper considers the merits of rules and discretion for monetary policy when the structure of the macroeconomic model and the probability distributions of disturbances are not well defined. It is argued that when it is costly to delay policy reactions to seldom-experienced shocks until formal algorithmic learning has been accomplished, and when time consistency problems are significant, a mixed strategy that combines a simple verifiable rule with discretion is attractive. The paper also discusses mechanisms for mitigating credibility problems and emphasizes that arguments against various types of simple rules lose their force under a mixed strategy.
Book Synopsis Financial Factors by : Mr.Pau Rabanal
Download or read book Financial Factors written by Mr.Pau Rabanal and published by International Monetary Fund. This book was released on 2015-07-14 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: We suggest a new approach for analyzing the role of financial variables and shocks in computing the output gap. We estimate a two-region DSGE model for the euro area, with financial frictions at the household level, between 2000-2013. After joining the monetary union, a decline in some countries’ borrowing costs contributed to a credit, housing and real boom and bust cycle. We show that financial frictions amplified economic fluctuations and the measure of the output gap in those countries. On the contrary, in countries such as France and Germany, financial frictions played a minor role in output gap measures. We also present evidence of the trade-offs faced by the European Central Bank when trying to stabilize two regions in a currency union with unsynchronized economic cycles.
Book Synopsis Monetary Policy, Inflation, and the Business Cycle by : Jordi Galí
Download or read book Monetary Policy, Inflation, and the Business Cycle written by Jordi Galí and published by Princeton University Press. This book was released on 2015-06-09 with total page 295 pages. Available in PDF, EPUB and Kindle. Book excerpt: The classic introduction to the New Keynesian economic model This revised second edition of Monetary Policy, Inflation, and the Business Cycle provides a rigorous graduate-level introduction to the New Keynesian framework and its applications to monetary policy. The New Keynesian framework is the workhorse for the analysis of monetary policy and its implications for inflation, economic fluctuations, and welfare. A backbone of the new generation of medium-scale models under development at major central banks and international policy institutions, the framework provides the theoretical underpinnings for the price stability–oriented strategies adopted by most central banks in the industrialized world. Using a canonical version of the New Keynesian model as a reference, Jordi Galí explores various issues pertaining to monetary policy's design, including optimal monetary policy and the desirability of simple policy rules. He analyzes several extensions of the baseline model, allowing for cost-push shocks, nominal wage rigidities, and open economy factors. In each case, the effects on monetary policy are addressed, with emphasis on the desirability of inflation-targeting policies. New material includes the zero lower bound on nominal interest rates and an analysis of unemployment’s significance for monetary policy. The most up-to-date introduction to the New Keynesian framework available A single benchmark model used throughout New materials and exercises included An ideal resource for graduate students, researchers, and market analysts
Book Synopsis Dominant Currency Paradigm: A New Model for Small Open Economies by : Camila Casas
Download or read book Dominant Currency Paradigm: A New Model for Small Open Economies written by Camila Casas and published by International Monetary Fund. This book was released on 2017-11-22 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: Most trade is invoiced in very few currencies. Despite this, the Mundell-Fleming benchmark and its variants focus on pricing in the producer’s currency or in local currency. We model instead a ‘dominant currency paradigm’ for small open economies characterized by three features: pricing in a dominant currency; pricing complementarities, and imported input use in production. Under this paradigm: (a) the terms-of-trade is stable; (b) dominant currency exchange rate pass-through into export and import prices is high regardless of destination or origin of goods; (c) exchange rate pass-through of non-dominant currencies is small; (d) expenditure switching occurs mostly via imports, driven by the dollar exchange rate while exports respond weakly, if at all; (e) strengthening of the dominant currency relative to non-dominant ones can negatively impact global trade; (f) optimal monetary policy targets deviations from the law of one price arising from dominant currency fluctuations, in addition to the inflation and output gap. Using data from Colombia we document strong support for the dominant currency paradigm.
Book Synopsis Monetary Policy Strategy by : Frederic S. Mishkin
Download or read book Monetary Policy Strategy written by Frederic S. Mishkin and published by MIT Press. This book was released on 2007 with total page 561 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book by a leading authority on monetary policy offers a unique view of the subject from the perspectives of both scholar and practitioner. Frederic Mishkin is not only an academic expert in the field but also a high-level policymaker. He is especially well positioned to discuss the changes in the conduct of monetary policy in recent years, in particular the turn to inflation targeting. Monetary Policy Strategydescribes his work over the last ten years, offering published papers, new introductory material, and a summing up, "Everything You Wanted to Know about Monetary Policy Strategy, But Were Afraid to Ask," which reflects on what we have learned about monetary policy over the last thirty years. Mishkin blends theory, econometric evidence, and extensive case studies of monetary policy in advanced and emerging market and transition economies. Throughout, his focus is on these key areas: the importance of price stability and a nominal anch fiscal and financial preconditions for achieving price stability; central bank independence as an additional precondition; central bank accountability; the rationale for inflation targeting; the optimal inflation target; central bank transparency and communication; and the role of asset prices in monetary policy.
