Inflation Targeting with NAIRU Uncertainty and Endogenous Policy Credibility [electronic resource] / Peter Isard.
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TextSeries: IMF Working Papers; Working Paper ; No. 01/7Publication details: Washington, D.C. : International Monetary Fund, 2001Description: 1 online resource (41 p.)ISBN: 1451842414 :ISSN: 1018-5941Subject(s): Credibility | Inflation Rate | Inflation | Model Construction and Estimation | Monetary Authorities | Monetary Policy Rules | Australia | United StatesAdditional physical formats: Print Version:: Inflation Targeting with NAIRU Uncertainty and Endogenous Policy CredibilityOnline resources: IMF e-Library | IMF Book Store Abstract: Stochastic simulations are employed to compare performance of monetary policy rules in linear and nonlinear variants of a small macro model with NAIRU uncertainity under different assumptions about the way inflation expectations are formed. Cases in which policy credibility is ignored or treated as exogenous are distinguished from cases in which credibility and inflation expectations respond endogenuously policy credibility strengthens the case for forward-looking inflation forecast based rules relative to backward-looking Taylor rules.
Stochastic simulations are employed to compare performance of monetary policy rules in linear and nonlinear variants of a small macro model with NAIRU uncertainity under different assumptions about the way inflation expectations are formed. Cases in which policy credibility is ignored or treated as exogenous are distinguished from cases in which credibility and inflation expectations respond endogenuously policy credibility strengthens the case for forward-looking inflation forecast based rules relative to backward-looking Taylor rules.
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