Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5098523 | Journal of Economic Dynamics and Control | 2014 | 16 Pages |
Abstract
In a forward-looking business cycle model, central banks can achieve the (timeless)optimal commitment equilibrium even in the absence of a commitment technology, if they are delegated with an objective function that is different from the societal one. The paper develops a general linear-quadratic method to solve for the optimal delegation parameters that generate the optimal amount of inertia in a Markov-perfect equilibrium, and studies the optimal design of some policy regimes that are nested within this framework: the (squared) optimal targeting rule; inflation, output-gap growth and nominal income growth targeting; and inflation and output-gap contracts.
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Florin O. Bilbiie,