The Performance of Forecast-Based Monetary Policy Rules under Model Uncertainty
- Topics:
- Financial Research
- Tags:
- Center For Financial Studies,
- Currency & Foreign Exchange,
- Finance,
- Human Resources,
- Performance,
- Performance Management,
- Uncertainty,
- Workforce Management
- Source:
- Center for Financial Studies
FREE Registration is required
Overview: The article investigates the performance of forecast-based monetary policy rules using five macroeconomic models that reflect a wide range of views on aggregate dynamics. It identifies the key characteristics of rules that are robust to model uncertainty. Such rules respond to the one-year-ahead inflation forecast and to the current output gap and incorporate a substantial degree of policy inertia. In contrast, rules with longer forecast horizons are less robust and are prone to generating indeterminacy. Finally, it identifies a robust benchmark rule that performs very well in all five models over a wide range of policy preferences.
(Is this item miscategorized? Does it need more tags? Let us know.)
Format: PDF | Size: 288KB | Date: Jun 2002 | Pages: 35
