Delegating optimal monetary policy inertia

Article dans une revue: In a forward-looking business cycle model, central banks can achieve the (timeless)optimal commitment equilibrium even in the absence of a commitment technology, if they are delegated with an objective function that is different from the societal one. The paper develops a general linear-quadratic method to solve for the optimal delegation parameters that generate the optimal amount of inertia in a Markov-perfect equilibrium, and studies the optimal design of some policy regimes that are nested within this framework: the (squared) optimal targeting rule; inflation, output-gap growth and nominal income growth targeting; and inflation and output-gap contracts.

Auteur(s)

Florin Bilbiie

Revue
  • Journal of Economic Dynamics and Control
Date de publication
  • 2014
Mots-clés JEL
C61 C73 E31 E52 E58 E61
Mots-clés
  • Discretion and commitment
  • Inertia
  • Optimal delegation
  • Stabilization bias
  • Timeless-optimal policy
  • Inflation
  • Output gap growth
  • Nominal income growth targeting
Pages
  • 63-78
Version
  • 1
Volume
  • 48