the policy preferences of the us federal reserve in this paper we model and explain us macroeconomic outcomes subject to the discipline that monetary policy is set optimally exploiting the restrictions that come from optimal policymaking we estimate the parameters in the federal reserve s policy objective function together with the parameters in its optimization constraints for the period following volcker s appointment as chairman we estimate the implicit inflation target to be around 1 4 and show that policymakers assigned a significant weight to interest rate smoothing we show that the estimated optimal policy provides a good description of us data for the 1980s and 1990s

practice prize report planning new tariffs at tele ring the application and impact of an integrated segmentation targeting and positioning tool tele ring is a mobile phone organization selling contracts and cell phones in the austrian market the market situation in 2005 was highly competitive and dynamic resulting in relatively short tariff life cycles excessively long lead times made tele ring s management feel dissatisfied with their new tariff development process furthermore a new competitor had entered the market posing a major threat and it was unclear how to effectively safeguard tele ring s position in the market in cooperation with the management we implemented and tested a new segmentation targeting and positioning tool which provides managers with information on their target markets customer preferences competitors strengths and customer segments it allows for the simultaneous visualization of these data on a single map and facilitates timely and accurate decision making in particular we report on the design and the implementation of a new pricing scheme formel 10 which became the most successful new tariff introduction in this competitive market tele ring s managers were very much impressed with our tool s ability to represent the market on a single map and with its capacity to allow for intuitive interpretation in addition the tool enhanced internal communication between its users and different stakeholders during the new tariff development process

monetary policy inclinations we examine whether central banks should complement their inflation forecasts with interest rate projections introducing a central bank loss function that accounts for deviations from announcements we incorporate the publication of policy inclinations into a dynamic monetary model we show that in the presence of cost push shocks the publication of interest rate forecasts tends to improve welfare

optimal simple monetary and fiscal rules under limited asset market participation the combination of limited asset market participation and consumption habits generates indeterminacy for empirically plausible calibrations of a business cycle model characterized by price and nominal wage rigidities equilibrium determinacy is restored by demand management policies based on simple fiscal rules in this regard fiscal control of nominal income growth is particularly effective in addition the complementarity between the taylor rule and the fiscal feedback on nominal income growth produces relatively large welfare gains limiting both aggregate and intragroup volatilities

optimal fiscal feedback on debt in an economy with nominal rigidities we examine the impact of different degrees of fiscal feedback on debt in an economy with nominal rigidities where monetary policy is optimal we look at the extent to which different degrees of fiscal feedback enhances or detracts from the ability of the monetary authorities to stabilise output and inflation using an objective function derived from utility we find the optimal level of fiscal feedback to be small there is a clear discontinuity in the behaviour of monetary policy and welfare either side of this optimal level as the extent of fiscal feedback increases optimal monetary policy becomes less active because fiscal feedback tends to deflate inflationary shocks however this fiscal stabilisation is less efficient than monetary policy and so welfare declines in contrast if fiscal feedback falls below some critical value either the model becomes indeterminate or optimal monetary policy becomes strongly passive and this passive monetary policy leads to a sharp deterioration in welfare

a probabilistic choice model for market segmentation and elasticity structure marketing scholars commonly characterize market structure by studying the patterns of substitution implied by brand switching though the approach is useful it typically ignores the destabilizing

coordinating monetary and macroprudential policies this paper studies noncooperative games between a monetary authority and a macroprudential regulator whose objectives are a subset of those in the social loss function the analysis is based on a new keynesian model with a financial sector and a financial friction a la gertler and karadi 2011 when the friction affects the financing of all factors of production equally macroprudential policy is shown to be a powerful additional tool fully eliminating inefficiencies regardless of the source of the shock and no matter whether the central bank and the regulator cooperate but when trade offs are present and policy is discretionary the institutional arrangements become crucial while coordination leads to higher welfare than a setting in which each authority takes the decision rule of the other as given namely the nash equilibrium our analysis shows that a noncooperative setting in which the macroprudential authority acts as a leader within the period can be superior to cooperation finally our conclusions are unaffected by whether the macroprudential instrument affects funding costs or acts as a liquidity requirement

a toolbox for the numerical study of linear dynamic rational expectations models espanolse presenta una guia para resolver y estudiar modelos de expectativas racionales dinamicas lineales ldre luego de codificar el modelo se aplica una function simple para log linealizarlo simular los efectos de series exogenas de shocks calcular condiciones de momentos muestrales y poblacionales y obtener funciones de impulso respuesta se resuelven y estudian detalladamente tres modelos clasicos en la literatura de real business cycles brock and mirman ldre toolbox of matlab functionsoptimal growth and uncertainty the discounted case journal of economic theory 4 3 479 513 1972 king plosser and rebelo production growth and business cycles i the basic neoclassical model journal of monetary economics 21 195 232 1988 y mendoza real business cycles in a small open economy american economic review 81 4 797 818 1991 englishby simplifying the computational tasks and by providing step by step explanations of the procedures required to study a linear dynamic rational expectations ldre model this paper and the accompanying ldre toolbox of matlab functions guide a researcher with almost no experience in computational work to resolve and study his own model after coding the model following specific guidelines a single function call is all that is needed to log linearize the model simulate it under exogenous sequences of shocks compute sample and population moment conditional models in the real business cycles literature are solved and studied throughout to give detailed examples of the steps involved in solving and studying ldre models using the ldre toolbox namely the economies in brock and mirman optimal growth and uncertainty the discounted case journal of economic theory 4 3 479 513 1972 king plosser and rebelo production growth and business cycles i the basic neoclassical model journal of monetary economics 21 195 232 1988 and mendoza real business cycles in a small open economy american economic review 81 4 797 818 1991

discretionary policy and multiple equilibria in lq re models we study discretionary equilibria in dynamic linear quadratic rational expectations models in contrast to the assumptions that pervade this literature we show that these models do have multiple equilibria in some situations we demonstrate the existence of multiple discretionary equilibria by example we investigate general properties of discretionary equilibria and discuss implications for numerical algorithms

openness imperfect exchange rate pass through and monetary policy abstract this paper analyses the implications of imperfect exchange rate pass through for optimal monetary policy in a linearised open economy dynamic general equilibrium model calibrated to euro area data imperfect exchange rate pass through is modelled by assuming sticky import price behaviour the degree of domestic and import price stickiness is estimated by reproducing the empirical identified impulse response of a monetary policy and exchange rate shock conditional on the response of output net trade and the exchange rate it is shown that a central bank that wants to minimise the resource costs of staggered price setting will aim at minimising a weighted average of domestic and import price inflation

u s monetary regimes and optimal monetary policy in the euro area monetary policy in the united states has been documented to have switched from reacting weakly to inflation fluctuations during the 1970s to fighting inflation aggressively from the early 1980s onward in this paper i analyze the impact of the u s monetary policy regime switches on the eurozone i construct a new keynesian two country model where foreign u s monetary policy switches regimes over time i estimate the model for the u s and the euro area using quarterly data and find that the united states has switched between those two regimes in line with existing evidence i show that foreign regime switches affect home eurozone inflation and output volatility and their responses to shocks substantially as long as the home central bank commits to a time invariant interest rate rule reacting to domestic conditions only optimal policy in the home country instead requires that the home central bank reacts strongly to domestic producer price inflation and to international variables such as imported goods relative prices in fact i show that currency misalignments and relative prices play a crucial role in the transmission of foreign monetary policy regime switches internationally interestingly i show that only marginal gains arise for the euro area when the european central bank ecb adjusts its policy according to the monetary regime in the united states thus a simple time invariant monetary policy rule with a strong reaction to producer price index ppi inflation and relative prices is enough to counteract the effects of monetary policy switches in the united states

solution and estimation of re macromodels with optimal policy macro models of monetary policy typically involve forward looking behavior except in rare circumstances we have to apply some numerical method to find the optimal policy and the rational expectations equilibrium this paper summarizes a few useful methods and shows how they can be combined with a kalman filter to estimate the deep model parameters with maximum likelihood simulations of a macro model with staggered price setting interest rate elastic output and optimal monetary policy illustrate the properties of this estimation approach

speed limit policies the output gap and optimal monetary policy in a standard new keynesian model a myopic central bank concerned with stabilizing inflation and changes in the output gap will implement a policy under discretion that replicates the optimal timeless perspective precommitment policy by stabilizing output gap changes the central bank imparts inertia into output and inflation that is absent under pure discretion even a fully optimizing i e non myopic central bank operating in a discretionary policy environment achieves better social outcomes if it focuses on inflation and changes in the output gap than are achieved under inflation targeting this abstract was borrowed from another version of this item

optimal monetary policy in the euro area in the presence of heterogeneity abstract this paper examines the optimal design of monetary policy in the european monetary union in the presence of structural asymmetries across union member countries it derives analytically an optimal interest rate rule under commitment and studies the dependence of its coefficients on the parameters of the structural model of each economy the central bank s preferences for inflation and output stabilization as shown in its loss function and the relative size of each country based on a two country forward looking general equilibrium model which is estimated for two euro area countries germany and france we show that there are gains to be achieved by the ecb taking into account the heterogeneity of economic structures this finding appears to be robust under alternative weights given by the central bank to the stabilization of the target variables although the implementation of the proposed rule involves difficulties relating to data and estimation constraints as well as risks of accommodating structural divergences it is important that the ecb takes into consideration national characteristics in formulating its monetary policy especially in view of more countries joining the european monetary union in the future however as monetary and financial integration advances the welfare benefits of monetary policy responding to individual countries variables may become less significant

indicator variables for optimal policy the optimal weights on indicators in models with partial information about the state of the economy and forward looking variables are derived and interpreted both for equilibria under discretion and under commitment an example of optimal monetary policy with a partially observable potential output and a forward looking indicator is examined the optimal response to the optimal estimate of potential output displays certainty equivalence whereas the optimal response to the imperfect observation of output depends on the noise in this observation

inflation targeting and exchange rate pass through this paper analyzes how endogenous imperfect exchange rate pass through affects inflation targeting optimal monetary policies in a new keynesian small open economy the paper shows that an inverse relation exists between the pass through and the insulation of the economy from foreign and monetary policy shocks and that imperfect pass through tends to decrease the variability of the terms of trade furthermore with cpi inflation targeting in the short run delayed pass through constrains monetary policy more than incomplete pass through and interest rate smoothing amplifies this effect when the pass through decreases the variability in economic activity tends to rise and the trade off between the stabilization of cpi inflation and output worsens in direct relation to how strictly the central bank is targeting cpi inflation in contrast with domestic inflation targeting optimal monetary policy is not constrained and opposite results occur consequently imperfect pass through favors the choice of domestic to cpi inflation targeting

time consistent control in non linear models abstract the paper shows how to use optimal control to compute optimal time consistent markovian government policies in nonlinear dynamic general equilibrium models it extends cohen and michel s 1988 results for the linear quadratic case the method involves replacing private agents costate variables with flexible functions of current state variables in the government s maximization problem the functions hold in equilibrium to an arbitrarily close approximation they can be found numerically by perturbation or projection methods a stochastic model of optimal public spending illustrates the technique

when is discretion superior to timeless perspective policymaking the monetary policy literature assumes increasingly that policy is formulated according to the timeless perspective woodford 1999a however by treating appropriately the auxiliary state variables that characterize the timeless perspective equilibrium when evaluating policy performance this paper shows that discretionary policymaking can be superior to timeless perspective policymaking and identifies model features that make this outcome more likely using standard new keynesian dsge models discretion is found to dominate timeless perspective policymaking when the price wage phillips curves are relatively flat due perhaps to firm specific capital or labor and or kimball 1995 aggregation in combination with nominal rigidities these results suggest that studies applying the timeless perspective might also usefully compare its performance to discretion paying careful attention to how policy performance is evaluated

indicator variables for optimal policy under asymmetric information the optimal weights on indicators in models with partial information about the state of the economy and forward looking variables are derived and interpreted both for equilibria under discretion and under commitment the private sector is assumed to have more information about the state of the economy than the policymaker certainty equivalence holds for the optimal reaction function in state space form t he coefficients are independent of the degree of uncertainty about the state of the economy however in the case of commitment certainty equivalence does not hold for the reaction function in integrative form the policy instrument cannot be written as a distributed lag of past estimates of past states of the economy instead optimal policy will generally depend on new estimates of past states of the economy and in ways that depend on the information structure furthermore the usual separation principle does not hold since the estimation of the state of the economy is not independent of optimization and is in general quite complex we present a general characterization of optimal filtering and control in settings of this kind and discuss an application of our methods to the problem of the optimal use of real time macroeconomic data in the conduct of monetary policy

inferring monetary policy objectives with a partially observed state accounting for the uncertainty inherent in real time perceptions of the state of the economy is believed to be critical for the analysis of historical monetary policy we investigate this claim through the lens of a small scale new keynesian model with optimal discretionary policy and partial information about the state the model is estimated using maximum likelihood on us data over the volcker greenspan bernanke regime a comparison of our estimates to those from a version of the model with complete information reveals that under partial information i the federal reserve demonstrates a significant concern for stabilizing fluctuations in the output gap and ii the discrepancy between optimal and observed policy behavior is smaller

uncertainty risk neutral measures and security price booms and crashes abstract this paper provides a general analysis of intertemporal utility based on the multiple priors model of aversion to knightian uncertainty then the existence of equilibrium is proven for a representative agent security market model it is shown that uncertainty aversion can invalidate the existence of a risk neutral measure representation for prices in addition an example suggests an intriguing link between uncertainty aversion and the possibility of abrupt changes in security prices the analysis relies heavily on a fubini type theorem for analytic functions due to dellacherie and meyer probabilities and potential c north holland new york 1988 journal of economic literature classification numbers g12 d81 d90

optimal monetary policy and the role of hybrid inflation price level targets this study investigates the role of hybrid inflation price level targets as a solution to the well known stabilization bias problem that arises under discretionary policies the analysis shows that social welfare will be improved by employing a weighted average of inflation and price level as one of the central bank s target variables in addition to the output gap growth target the reason is that imposing the optimal hybrid target will reduce inflation variability in a highly efficient way in particular the optimal hybrid regime outperforms other previously suggested regimes when the degree of inflation persistence is moderate

should central banks target consumer prices or the exchange rate in this article we consider two arguments suggesting that monetary authorities in an open economy should target output price inflation and not consumer price inflation the first suggests that output price inflation corresponds to the distortions caused by price rigidity the second shows how policy rules involving consumer price inflation can induce instability because of the feedback from interest rates to consumer price inflation via the exchange rate we examine both arguments in the context of an open economy which is subject to a range of shocks we show that both arguments remain robust but that there is a case for including a terms of trade or real exchange rate gap term in the authorities welfare function alongside the output gap and output price inflation

monetary policy asset prices and uncertainty abstract we show that the benefits from reacting to misalignments in asset prices may disappear when there is noise in the variables to which the monetary policy instrument responds and this noise is positively correlated across variables

estimating central bank preferences under commitment and discretion this paper explains u s macroeconomic outcomes with an empirical new keynesian model in which monetary policy minimizes the central bank s loss function the presence of expectations in the model forms a well known distinction between two modes of optimization termed commitment and discretion the model is estimated separately under each policy using maximum likelihood over the volcker greenspan bernanke period comparisons of fit reveal that the data favor the specification with discretionary policy estimates of the loss function weights point to an excessive concern for interest rate smoothing in the commitment model but a more balanced concern relative to inflation and output stability in the discretionary model

optimal monetary policy with countercyclical credit spreads we study optimal monetary policy in a new keynesian dynamic stochastic general equilibrium dsge model with a credit channel and relationship lending in banking we show that borrowers bank specific deep habits give rise to countercyclical credit spreads which in turn make optimal monetary policy depart substantially from price stability under both discretion and commitment our analysis shows that the welfare costs of setting monetary policy under discretion with respect to the optimal ramsey plan and of using simpler suboptimal policy rules are strictly increasing in the magnitude of deep habits in credit markets and market power in banking

identification and estimation in non fundamental structural varma models the basic assumption of a structural vector autoregressive moving average svarma model is that it is driven by a white noise whose components are uncorrelated or independent and can be interpreted as economic shocks called structural shocks when the errors are gaussian independence is equivalent to non correlation and these models face two identification issues the first identification problem is static and is due to the fact that there is an infinite number of linear transformations of a given random vector making its components uncorrelated the second identification problem is dynamic and is a consequence of the fact that even if a svarma admits a non invertible moving average ma matrix polynomial it may feature the same second order dynamic properties as a varma process in which the ma matrix polynomials are invertible the fundamental representation the aim of this paper is to explain that these difficulties are mainly due to the gaussian assumption and that both identification challenges are solved in a non gaussian framework if the structural shocks are assumed to be instantaneously and serially independent we develop new parametric and semi parametric estimation methods that accommodate non fundamentalness in the moving average dynamics the functioning and performances of these methods are illustrated by applications conducted on both simulated and real data

macroeconomic models and the yield curve an assessment of the fit abstract many have questioned the empirical relevance of the calvo yun model this paper adds a term structure to three widely studied macroeconomic models calvo yun hybrid and svensson we back out from observations on the yield curve the underlying macroeconomic model that most closely matches the level slope and curvature of the yield curve with each model we trace the response of the yield curve to macroeconomic shocks we assess the fit of each model against the observed behaviour of interest rates and find limited support for the calvo yun model in terms of fit with the observed yield curve we find some support for the hybrid model but the svensson model performs best

monetary policy trade offs and the correlation between nominal interest rates and real output the authors present a structural model of the u s economy that combines their price contracting specification with a term structure relationship an aggregate demand curve and a monetary policy reaction function the model matches important features of postwar data well and provides a structural explanation of the correlation between real output and the short term nominal rate of interest the authors perform a battery of monetary policy experiments that show that as viewed through the lens of this model monetary policy has struck a good balance recently among competing monetary policy objectives copyright 1995 by american economic association

figuring out the fed beliefs about policymakers and gains from transparency in this paper i use a markov chain monte carlo algorithm to estimate a model of private sector behavior that does not feature private sector knowledge of the monetary policymaking process and instead leaves firms and households uncertain about how monetary policy is set the private sector entertains two competing views of monetary policymaking which i estimate firms and households use bayes law on a rolling data sample to distinguish between those two models i use this setup to study the evolution of beliefs about the federal reserve and the possible gains from transparency

an alternative explanation of the price puzzle abstract this paper proposes an explanation for the frequent appearance of a price puzzle in vars designed for monetary policy analysis it assumes that the data are generated by a model in which output and output gap are not equivalent while an econometrician follows the common practice of including only output in the var the omission of the output gap is shown to spuriously produce a price puzzle and several other incorrect conclusions in a class of commonly used models this can happen even if the model admits a triangular identification and if the forecasts produced by the misspecified var are optimal when the model is tested on us data all predictions are supported a commodity price index is not needed to solve the puzzle

observed and unobserved preference heterogeneity in brand choice models this paper extends the scanner based choice literature by explicitly incorporating individual level brand preference data we illustrate our model using a unique data set that combines survey and scanner data collected from the same individuals the addition of individual specific brand preference information significantly improves fit and prediction furthermore this observed heterogeneity better explains choice than does unobserved heterogeneity in the standard scanner model s parameters more importantly we find that the standard model underestimates the importance of consumers brand preferences and overestimates both brand loyalties and price sensitivities brand loyalty is overestimated because models without preference information confound state dependence heterogeneity and preference effects price sensitivities are inflated because the average preference based consumer is implicitly assumed to be more willing to switch from his preferred brand than is the real preference based consumer further standard models overestimate the heterogeneity in price and loyalty sensitivities and misidentify both price and loyalty sensitive consumers the managerial implications of our findings and the applicability of our methodology when survey data are collected infrequently and for only a subsample of consumers are pursued we demonstrate that even under these circumstances better populationwide pricing and promotion decisions are identified and more accurate targeting results

research note using basket composition data for intelligent supermarket pricing how can supermarkets use the vast data they have to design strategies to compete for large basket shoppers potentially their most profitable customers we say analyze the data to glean basket composition of heterogeneous consumers of theoretical and practical interest is the question will our suggestion improve supermarket profits and if so by what pricing strategies by answering this we can also answer the question do results of extant research on single product marketing that using such information intensifies competition and lowers profits generalize to multiproduct marketing by supermarkets that carry several products and whose patrons purchase multiple items we derive equilibrium data based intelligent pricing strategies that also produce increased supermarket profits what is more interesting is our result that data analysis is profitable whether or not a competitor undertakes data analysis if not too costly implementing data analysis is a dominant strategy moreover with comprehensive data analysis connecting basket information and household data stores can increase profits further by targeting rewards at individual households thereby segmenting the market more completely in contrast to past research findings we show that for supermarkets even under competition use of information on past purchases enables intelligent pricing better segmentation and higher profits

a contract and balancing mechanism for sharing capacity in a communication network we propose a method for determining how much to charge users of a communication network when they share bandwidth our approach can be employed either when a network owner wishes to sell bandwidth for a specified period of time to a number of different users or when users cooperate to build a network to be shared among themselves our proposed contract and balancing mechanism can mediate between rapidly fluctuating prices and the longer time scales over which bandwidth contracts may be traded an advantage of the process is that it avoids perverse incentives for a capacity provider to increase congestion

practice prize article chan4cast a multichannel multiregion sales forecasting model and decision support system for consumer packaged goods we discuss the development and implementation of chan4cast a sales forecasting model by pack size category channel region customer account and a web based decision support system dss for consumer packaged goods in addition to capturing the effects of such variables as past sales trend own and competitor prices and promotional variables and seasonality the model accounts for the effects of temperature significant holidays new product introductions trading day corrections and adjustments to the wholesale level in general the model forecasts sales volume satisfactorily for a leading consumer packaged goods company the dss enables top and mid level executives in sales marketing strategic planning and finance to develop accurate forecasts of sales volume plan prices and promotional activities over a long time horizon to track sales response to marketing actions over time and to simulate forecast scenarios based on possible marketing decisions and other variables chan4cast is being rolled out for more users and more divisions in the company the key take aways are that successful development and implementation of a rigorous marketing science model require a strong internal champion a careful balance between modeling sophistication and practical relevance good diagnostic features regular validations and greater attention to the development of a fast and responsive dss

the spatial representation of market information to be used effectively market knowledge and information must be structured and represented in ways that are parsimonious and conducive to efficient managerial decision making this manuscript proposes a new latent structure spatial model for the representation of market information that meets this requirement when applied to a priori defined e g socioeconomic segments our proposed methodology provides a new way to display marketing data parsimoniously via dimension reduction through a factor analytic specification in post hoc studies we simultaneously derive market segments from the data and represent the structure of market information within each of the unobserved derived groups segments we summarize all relevant information concerning derived market segments via a series of maps that prove conducive to the quick and accurate dissemination of customer and competitor market information the associations between the variables are captured in a reduced space where each variable is represented by a vector that emanates from the origin and terminates on a hypersphere of unit the vector length is arbitrary radius e g a unit circle in a two dimensional space the angles between the variable vectors capture the correlation structure in the reduced space the method is very general and can be utilized to identify latent structures in a wide range of marketing applications we present an actual commercial marketing application involving the normalized prescription shares of specialists of ethical drugs to demonstrate the effectiveness of representing market information in this manner and to reveal the advantage of the proposed methodology over a more general finite mixture based method the proposed methodology derives three segments that tend to group specialists with respect to the stage of adoption of innovation in this therapeutic category the specialists in the first group appear to be laggards because they prescribe more of the older class of brands however they also have a higher than average preference for a newer and somewhat cheaper brand this suggests that some of the specialists belonging to this segment may be price sensitive while others may exhibit a slower adoption cycle replacing the older class with the newer brands and thus skip one stage in the cycle of innovation the specialists in the second segment are heavy users of the newer class of brands but are not particularly fast to adopt the latest brands finally the last segment clearly consists of innovators traditionally pharmaceutical marketers have viewed specialists in one of two extremes all specialists are the same i e the market has only one segment or all specialists are very different i e the market consists of 10 000 segments of one physician each not surprisingly this analysis suggests a more moderate perspective specialists adopt new products at different rates

the new keynesian phillips curve and staggered price and wage determination in a model with firm specific labor we develop a dsge model with rm speci c labor where rm level wage bargaining and price setting are subject to calvo type staggering this is in general an intractable problem due to complicated intertemporal dependencies between price and wage decisions however the problem is signi cantly simpli ed if we in line with empirical evidence assume that prices can be changed whenever wages are we show that the price and wage setting relationships are substantially altered by the introduction of rm speci c labor speci cally the in ation response is substantially dampened whereas the wage in ation response is increased as compared to models with freely mobile labor these distinctive features of the model with rm speci c labor is supported by empirical evidence from a structural var

managing beliefs about monetary policy under discretion in models of monetary policy discretionary policymaking is typically constrained in its ability to manage public beliefs however when a policymaker possesses private information policy actions serve as signals to the public about unobserved economic conditions and belief management becomes an integral part of optimal discretion policies this article derives the optimal time consistent policy for a general linear quadratic setting the optimal policy is illustrated in a simple new keynesian model where analytical solutions can be derived as well in this model imperfect information about the policymaker s output target leads to lower policy losses

willingness to pay estimation with choice based conjoint analysis addressing extreme response behavior with individually adapted designs the increasing consideration of behavioral aspects in operations management models has prompted greater use of choice based conjoint cbc studies in operations research such studies can elicit consumers willingness to pay wtp a core input for many optimization models however optimization models can yield valid results only if consumers wtp is estimated accurately a simulation study and two field studies show that extreme response behavior in cbc studies such that consumers always or never choose the no purchase option harms the validity of wtp estimates reporting the share of consumers who always and never select the no purchase option allows for detecting extreme response behavior this study suggests an individually adapted design that avoids extreme response behavior and thus significantly improves wtp estimation accuracy

monetary policy response to oil price shocks how should monetary authorities react to an oil price shock this paper shows that in a noncompetitive economy policies that perfectly stabilize prices entail large welfare costs hence explaining the reluctance of policymakers to enforce them the policy trade off is nontrivial because oil energy is an input to both production and consumption as welfare maximizing policies are hard to implement and communicate i derive a simple interest rate rule that depends only on observables but mimics the optimal plan in all dimensions the optimal rule is hard on core inflation but accommodates oil price changes

what is wrong with taylor rules using judgment in monetary policy through targeting rules it is argued that inflation targeting is best understood as a commitment to a targeting rule rather than an instrument rule e ither ageneral targeting rule explicit objectives for monetary policy or a specific targeting rule a criterion for the forecasts of the target variables to be fulfilled essentially the equality of the marginal rates of transformation and substitution between the target variables targeting rules allow the use of judgment and extramodel information are more robust and easier to verify than optimal instrument rules and they can nevertheless bring the economy close to the socially optimal equilibrium

demand and innovation in services the case of mobile communications abstract this paper aims to analyse the pricing strategies of mobile communications operators and examine the role of demand characteristics in the development of new tariff plans in so doing we depart from a traditional industrial organization approach to price discrimination and interpret new tariff plans as innovations in the spirit of schumpeter we look at competition in this sector as depending upon this form of innovation and we argue that given the specific features of the industry the development of new tariff plans is strongly related to the users characteristics and behaviour our main point is that in a context of uncertainty demand affects firms innovative strategies in two ways first by providing information on user behaviour and by increasing the capability of market segmentation and second by providing the incentives to innovate this argument is supported by an empirical analysis carried out on the basis of an original dataset which includes all the tariff plans on offer in the history of the italian market between 1992 and 2005 we find that both a firm s installed customer base and the level of market saturation play a role in shaping firms innovative pricing strategies in terms of the number and characteristics of the new tariff plans

optimal monetary policy under low trend inflation abstract in the monetary policy literature it is common to assume that trend inflation is zero despite overwhelming evidence that zero inflation is neither empirically relevant nor a practical objective for central bank policy we therefore extend the standard new keynesian model to allow for positive trend inflation showing that even low trend inflation has strong effects on optimal monetary policy and the dynamics of inflation output and interest rates under discretion the efficient policy deteriorates and there is no guarantee of determinacy even with commitment targeting non zero trend inflation leads to substantial welfare losses our results serve as a warning against indiscriminate use of models assuming zero trend inflation