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Optimal Targeting Regimes And Instrument Rules In The Basic New Keynesian Model, Luc Marest

Dissertations, Theses, and Capstone Projects

In the first chapter, the objective is to measure the value of commitment in executing monetary policies in the context of the New Keynesian model and with value that is represented by the standard quadratic welfare function containing weighted output gap and inflation variances. It is found that there is a substantial potential for improvement of welfare under commitment, but this depends on some key parameters in the model. The range of parameter calibrations most often found in the literature, however, suggests the improvements will be large. We then consider specific monetary policies akin to Taylor rules. From the optimality …