Monetary policy with imperfect knowledge
By: Athanasios Orphanides and John C. Williams.
Contributors: Williams, John C.
Series: Finance and economics discussion series ;; 2005-51; Finance and economics discussion series (Online) ;; 2005-51.
Publisher: Federal Reserve Board
Published: 2005
Place of publication: Washington, D.C
Language: eng
Format: Electronic resource
Description: "We examine the performance and robustness of monetary policy rules when the central bank and the public have imperfect knowledge of the economy and continuously update their estimates of model parameters.  We find that versions of the Taylor rule calibrated to perform well under rational expectations with perfect knowledge perform very poorly when agents are learning and the central bank faces uncertainty regarding natural rates.  In contrast, difference rules, in which the change in the interest rate is determined by the inflation rate and the change in the unemployment rate, perform well when knowledge is both perfect and imperfect"--Federal Reserve Board web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 12/8/2005.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.