The Science of Monetary Policy: a New Keynesian Perspective

@article{Clarida1999TheSO,
  title={The Science of Monetary Policy: a New Keynesian Perspective},
  author={Richard H. Clarida and J. Gaĺı and Mark Gertler},
  journal={Monetary Economics},
  year={1999}
}
This paper reviews the recent literature on monetary policy rules. We exploit the monetary policy design problem within a simple baseline theoretical framework. We then consider the implications of adding various real world complications. Among other things, we show that the optimal policy implicitly incorporates inflation targeting. We also characterize the gains from making a credible commitment to fight inflation. In contrast to conventional wisdom, we show that gains from commitment may… Expand
Learning, robust monetary policy and the merit of precaution
Abstract We study in a New Keynesian framework the consequences of adaptive learning for the design of robust monetary policy. Compared to rational expectations, the fact that private sector followsExpand
New Keynesian Economics: A Monetary Perspective
In this article we construct a simple analytically tractable model to explore and evaluate New Keynesian ideas. First, we show that a New Keynesian model need not exhibit Phillips curve correlationsExpand
Sectoral inflation persistence and optimal monetary policy
Abstract This paper examines optimal monetary policy in a new Keynesian model with sectoral inflation persistence. It focuses on the welfare differential between timeless perspective (TP) and aExpand
The Theoretical Frame for Monetary Policy
This paper reviews the recent literature on monetary policy rules. In particular, we discuss the theoretical framework underlying different monetary policy strategies. Currently, many central banksExpand
Optimal Monetary Policy for a Pessimistic Central Bank
We consider the impact of pessimism on monetary policy within a model with backward looking expectations and persistence in the dynamics of output and inflation. We show that pessimistic monetaryExpand
Deconstructing the Art of Central Banking
This paper proposes a markedly different transmission mechanism from monetary policy to the macroeconomy, focusing on how policy changes nominal inertia in the Phillips curve. Using recentExpand
Robust Monetary Policy in a Small Open Economy
This paper studies how a central bank’s preference for robustness against model misspecification affects the design of monetary policy in a New-Keynesian model of a small open economy. Due to theExpand
Real Balance Effects and Monetary Policy
This article presents a dynamic stochastic new Keynesian model with real balance effects. I find a number of results that would not appear in the traditional framework. It is shown that the realExpand
Macroeconomics without the LM curve: an alternative view
This paper develops a ‘fully articulated’ post-Keynesian alternative to the ‘New Consensus’ macroeconomic model, based on explicitly post-Keynesian hypotheses about the inflation process, theExpand
The Limits of Monetary Policy Under Imperfect Knowledge
The results in the paper have two main implications for current monetary policy debate. First, the past recession is widely believed to be caused by a `demand' shock, lowering both the output-gap andExpand
...
1
2
3
4
5
...

References

SHOWING 1-10 OF 187 REFERENCES
EXPECTATIONS, CREDIBILITY, AND TIME-CONSISTENT MONETARY POLICY
This paper addresses the problem of multiple equilibria in a model of time-consistent monetary policy. It suggests that this problem originates in the assumption that agents have rationalExpand
Inflation Targeting: A New Framework for Monetary Policy?
In recent years a number of industrialized countries have adopted a strategy for monetary policy known as `inflation targeting.' We describe how this approach has been implemented in practice andExpand
Imperfect Credibility and Inflation Persistence
In this paper, we formulate a dynamic general equilibrium model with staggered nominal contracts, in which households and firms use optimal filtering to disentangle persistent and transitory shiftsExpand
Some models to guide monetary policymakers
Abstract We consider the nature of optimal cyclical monetary policy in three different stochastic models with various shocks - money demand shocks, productivity shocks, and government consumptionExpand
The New Neoclassical Synthesis and the Role of Monetary Policy
Macroeconomics is moving toward a New Neoclassical Synthesis, which like the synthesis of the 1960s melds Classical with Keynesian ideas. This paper describes the key features of the new synthesisExpand
Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory
We estimate a forward-looking monetary policy reaction function for the postwar United States economy, before and after Volcker’s appointment as Fed Chairman in 1979. Our results point to substantialExpand
Expectation Traps and Discretion
We argue that discretionary monetary policy exposes the economy to welfare-decreasing instability. It does so by creating the potential for private expectations about the response of monetary policyExpand
On the Optimal Monetary Policy Response to Noisy Indicators *
We describe a behavior of a central bank when its measures of current inflation and output are subject to measurement errors, in a framework of optimizing models with nominal price stickiness. In ourExpand
Optimal Monetary Policy in Open versus Closed Economies: An Integrated Approach
In Clarida et al. (1999; hereafter CGG), we presented a normative analysis of monetary policy within a simple optimization-based closedeconomy framework. We derived the optimal policy rule and, amongExpand
...
1
2
3
4
5
...