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Sophisticated monetary policies

'In standard approaches to monetary policy, interest rate rules often lead to indeterminacy. Sophisticated policies, which depend on the history of private actions and can differ on and off the equilibrium path, can eliminate indeterminacy and uniquely implement any desired competitive equilibrium. Two types of sophisticated policies illustrate our approach. Both use interest rates as the policy instrument along the equilibrium path. But when agents deviate from that path, the regime switches, in one example to money ; in the other, to a hybrid rule. Both lead to unique implementation, while pure interest rate rules do not. We argue that adherence to the Taylor principle is neither necessary nor sufficient for unique implementation with pure interest rate rules but is sufficient with hybrid rules. Our results are robust to imperfect information and may provide a rationale for empirical work on monetary policy rules and determinacy."--Abstract.

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  • "The Ramsey approach to policy analysis finds the best competitive equilibrium given available instruments but is silent about how to get there uniquely. Many ways of specifying monetary policy lead to indeterminacy. Sophisticated policies do not. They depend on the history of past actions and exogenous events, differ on and off the equilibrium path, and can uniquely produce any desired competitive equilibrium. This result holds in two standard monetary economies and is robust to trembles and imperfect monitoring. The result implies that adherence to the Taylor principle is unnecessary. We also show that such adherence is inefficient."
  • "'In standard approaches to monetary policy, interest rate rules often lead to indeterminacy. Sophisticated policies, which depend on the history of private actions and can differ on and off the equilibrium path, can eliminate indeterminacy and uniquely implement any desired competitive equilibrium. Two types of sophisticated policies illustrate our approach. Both use interest rates as the policy instrument along the equilibrium path. But when agents deviate from that path, the regime switches, in one example to money ; in the other, to a hybrid rule. Both lead to unique implementation, while pure interest rate rules do not. We argue that adherence to the Taylor principle is neither necessary nor sufficient for unique implementation with pure interest rate rules but is sufficient with hybrid rules. Our results are robust to imperfect information and may provide a rationale for empirical work on monetary policy rules and determinacy."--Abstract."@en
  • "In standard approaches to monetary policy, interest rate rules often lead to indeterminacy. Sophisticated policies, which depend on the history of private actions and can differ on and off the equilibrium path, can eliminate indeterminacy and uniquely implement any desired competitive equilibrium. Two types of sophisticated policies illustrate our approach. Both use interest rates as the policy instrument along the equilibrium path. But when agents deviate from that path, the regime switches, in one example to money; in the other, to a hybrid rule. Both lead to unique implementation, while pure interest rate rules do not. We argue that adherence to the Taylor principle is neither necessary nor sufficient for unique implementation with pure interest rate rules but is sufficient with hybrid rules. Our results are robust to imperfect information and may provide a rationale for empirical work on monetary policy rules and determinacy."@en
  • "In standard approaches to monetary policy, interest rate rules often lead to indeterminacy. Sophisticated policies, which depend on the history of private actions and can differ on and off the equilibrium path, can eliminate indeterminacy and uniquely implement any desired competitive equilibrium. Two types of sophisticated policies illustrate our approach. Both use interest rates as the policy instrument along the equilibrium path. But when agents deviate from that path, the regime switches, in one example to money; in the other, to a hybrid rule. Both lead to unique implementation, while pure interest rate rules do not. We argue that adherence to the Taylor principle is neither necessary nor sufficient for unique implementation with pure interest rate rules but is sufficient with hybrid rules. Our results are robust to imperfect information and may provide a rationale for empirical work on monetary policy rules and determinacy."
  • "'In monetary policy environments interest rate rules often lead to indeterminacy. We show that sophisticated policies, which depend on the history of private actions and can differ on and off the equilibrium path, can eliminate indeterminacy and uniquely implement any desired competitive equilibrium. We focus on two types of sophisticated policies in which the central bank uses interest rates along the equilibrium path. In one the central bank reverts to a money regime off the equilibrium path. In the other the central bank follows a hybrid rule under which for small deviations it uses an interest policy that adheres to the Taylor principle and for large deviations it reverts to a money regime. We show that our results are robust to imperfect information and argue that our work may provide a rationale for empirical work on monetary policy rules and determinacy."--Abstract."

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  • "Sophisticated monetary policies"@en
  • "Sophisticated monetary policies"
  • "Sophisticated Monetary Policies"
  • "Sophisticated Monetary Policies"@en

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