Implementing Optimal Monetary Policy in New-Keynesian Models with Inertia

@inproceedings{Evans2006ImplementingOM,
  title={Implementing Optimal Monetary Policy in New-Keynesian Models with Inertia},
  author={George W. Evans},
  year={2006}
}
We consider optimal monetary policy in New Keynesian models with inertia. First order conditions characterizing unconditionally optimal rational expectations equilibrium (REE) are determined and shown numerically to offer significant improvement over the timeless perspective. Implementation of the unconditionally optimal REE is considered via construction of interest-rate rules that are consistent with its associated unique equilibrium. Following Evans and Honkapohja (2004), an expectations… CONTINUE READING