Arbeitspapier
Risk Management in Action. Robust monetary policy rules under structured uncertainty.
Recent interest in ‘Risk Management’ has highlighted the relevance of Bayesian analysis for robust monetary- policy making. This paper sets out a comprehensive methodology for designing policy rules inspired by such considerations. We design rules that are robust with respect to model uncertainty facing both the policy-maker and private sector. We apply our methodology to three simple interest-rate rules: inflation-forecast- based (IFB) rules with a discrete forward horizon, one targeting a discounted sum of forward inflation, and a current wage inflation rule. We use an estimated DSGE model of the euro area and estimated measures of structured exogenous and parameter uncertainty for the exercise. We find that IFB rules with a long horizon perform poorly with or without robust design. Our discounted future targeting rule performs much better, indicating that policy can be highly forward-looking without compromising stabilization. The wage inflation rule dominates whether it is designed to have good robust properties or not.
- Sprache
-
Englisch
- Erschienen in
-
Series: ECB Working Paper ; No. 870
- Klassifikation
-
Wirtschaft
Monetary Policy
Prices, Business Fluctuations, and Cycles: Forecasting and Simulation: Models and Applications
Central Banks and Their Policies
- Thema
-
Interest-rate rules
Robustness
structured uncertainty
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Levine, Paul
McAdam, Peter
Pearlman, Joseph G.
Pierse, Richard
- Ereignis
-
Veröffentlichung
- (wer)
-
European Central Bank (ECB)
- (wo)
-
Frankfurt a. M.
- (wann)
-
2008
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:45 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Levine, Paul
- McAdam, Peter
- Pearlman, Joseph G.
- Pierse, Richard
- European Central Bank (ECB)
Entstanden
- 2008
Ähnliche Objekte (12)
Robust monetary rules under unstructured and structured model uncertainty
Robust frequency-based monetary policy rules
Robust frequency-based monetary policy rules
Robust Macroprudential Policy Rules under Model Uncertainty
Robust-Satisficing Monetary Policy Under Parameter Uncertainty
Managing Uncertainty Through Robust-Satisficing Monetary Policy
Output gaps and robust monetary policy rules
Parameter misspecification and robust monetary policy rules
Transition risk uncertainty and robust optimal monetary policy
Transition risk uncertainty and robust optimal monetary policy
Robust learning stability with operational monetary policy rules
Simple Monetary Policy Rules and Exchange Rate Uncertainty
Robust monetary rules under unstructured and structured model uncertainty
Robust frequency-based monetary policy rules
Robust frequency-based monetary policy rules
Robust Macroprudential Policy Rules under Model Uncertainty
Robust-Satisficing Monetary Policy Under Parameter Uncertainty
Managing Uncertainty Through Robust-Satisficing Monetary Policy
Output gaps and robust monetary policy rules
Parameter misspecification and robust monetary policy rules
Transition risk uncertainty and robust optimal monetary policy
Transition risk uncertainty and robust optimal monetary policy
Robust learning stability with operational monetary policy rules
Simple Monetary Policy Rules and Exchange Rate Uncertainty
Robust monetary rules under unstructured and structured model uncertainty
Robust frequency-based monetary policy rules
Robust frequency-based monetary policy rules
Robust Macroprudential Policy Rules under Model Uncertainty
Robust-Satisficing Monetary Policy Under Parameter Uncertainty
Managing Uncertainty Through Robust-Satisficing Monetary Policy
Output gaps and robust monetary policy rules
Parameter misspecification and robust monetary policy rules
Transition risk uncertainty and robust optimal monetary policy
Transition risk uncertainty and robust optimal monetary policy
Robust learning stability with operational monetary policy rules