Monetary policy uncertainty and macroeconomic performance: An extended non-bayesian framework

Pre-print, Working paper: The existing literature has shown that less political uncertainty, or more central bank transparency, may worsen macroeconomic performance by raising the nominal wage. We extend this analysis to a non-bayesian framework, where there is some aversion to ambiguity. We show that the result found in the literature under the bayesian approach does not hold when the distance from the bayesian case is large enough, or when a reduction in Knigtian uncertainty is considered. Then, less uncertainty, or more transparency of the central bank, does not raise the nominal wage and, as a consequence, macroeconomic performance is not worsened (and is in general strictly improved).

Author(s)

Daniel Laskar

Date of publication
  • 2008
Keywords JEL
D81 E58
Keywords
  • Political uncertainty
  • Central bank transparency
  • Knightian uncertainty
  • Macroecomomic performance
Internal reference
  • PSE Working Papers n°2008-01
Version
  • 1