Optimal Monetary Policy Rules in an Estimated Sticky-Information Model
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Abstract
This paper uses a dynamic stochastic general equilibrium (DSGE) model with sticky information as a laboratory to study monetary policy. It characterizes the model's predictions for macro dynamics and optimal policy at prior parameters, and then uses data on five US macroeconomic series to update the parameters and provide an estimated model that can be used for policy analysis. The model answers a few policy questions. How does sticky information affect optimal monetary policy? What is the optimal interest rate rule? What is the optimal elastic price-level targeting rule? How does parameter uncertainty affect optimal policy? Are the conclusions for the Euro area different? (JEL E13, E31, E43, E52)Citation
Reis, Ricardo. 2009. "Optimal Monetary Policy Rules in an Estimated Sticky-Information Model." American Economic Journal: Macroeconomics, 1 (2): 1-28. DOI: 10.1257/mac.1.2.1Additional Materials
JEL Classification
- E13 General Aggregative Models: Neoclassical
- E31 Price Level; Inflation; Deflation
- E43 Determination of Interest Rates; Term Structure of Interest Rates
- E52 Monetary Policy
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