Robust monetary policy rules with unknown natural rates

by Athanasios Orphanides

Publisher: Federal Reserve Board in Washington, D.C

Written in English
Published: Downloads: 257
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  • United States
  • Subjects:

    • Monetary policy -- United States -- Econometric models.,
    • Interest rates -- United States -- Econometric models.,
    • Unemployment -- United States -- Econometric models.
    • Edition Notes

      StatementAthanasios Orphanides and John C. Williams.
      SeriesFinance and economics discussion series ;, 2003-11, Finance and economics discussion series (Online) ;, 2003-11.
      ContributionsWilliams, John C.
      Classifications
      LC ClassificationsHG1
      The Physical Object
      FormatElectronic resource
      ID Numbers
      Open LibraryOL3389841M
      LC Control Number2004616531

North Charles Street Baltimore, Maryland, USA +1 () [email protected] © Project MUSE. Produced by Johns Hopkins University . A long-standing area of research and policy interest is the construction of a measure of monetary policy stance. One measure that has been proposed, as an alternative to indices that employ monetary aggregates or exchange rates, is the spread between the actual real interest rate and its flexible-price, or natural-rate, counterpart. Orphanides, Athanasios, and John C. Williams, “Robust Monetary Policy Rules with Unknown Natural Rates,” Brookings Papers on Economic Activity 2, , pp. Reifschneider, David, and John C. Williams, “Three Lessons for Monetary Policy in a Low-Inflation Era,” Journal of Money, Credit, and Bank November , Part 2, pp. The first rule is based on the policy rule suggested by Taylor (). Taylor () fixed r* to 2 percent and used the GDP deflator as the measure of update the rule, we make two modifications. First, given the Federal Open Market Committee’s (FOMC) Statement on Longer-Run Goals and Monetary Policy Strategy, we measure π t as inflation in the price index for personal.

  A Book Review of Strategies for Monetary Policy, John H. Cochrane and John B. Taylor, eds.1 Each year, the Hoover Institution hosts a conference on monetary policy at its Stanford University headquarters. The conferences bring together academics and Fed officials to discuss issues in monetary economics. The proceedings from the conference have now been [ ].   Nakov, Anton A. "Optimal and Simple Monetary Policy Rules with Zero Floor on the Nominal Interest Rate." International Journal of Central Banking 4, no. 2: Orphanides, Athanasios, and John C. Williams. "Robust Monetary Policy Rules with Unknown Natural Rates." Brookings Papers on Economic Activity, Fall: “Simple Rules for Monetary Policy,” Federal Reserve Bank of San Francisco Economic Review, , “Robust Monetary Policy Rules with Unknown Natural Rates,” (with Athanasios Orphanides), Brookings Papers on Economic Activity, Vol. 2, , “Three Lessons for Monetary Policy in a Low Inflation Era,” (with David. ponding real interest rate can be referred to as the natural (or equilibrium or neutral) real interest rate. This variable is a key ingredient in Taylor-type rules and thus plays an important role in the analysis of monetary policy predicated on such rules. Yet the natural rate is an unobservable entity, and it must somehow be extracted.

Robust monetary policy rules with unknown natural rates. A Orphanides, JC Williams. The decline of activist stabilization policy: Natural rate misperceptions, learning, and expectations. A Orphanides, JC Williams. Journal of Economic Dynamics and Control 29 (11), ,   A perennial criticism of the Federal Reserve (Fed) is its adherence to discretion rather than to an explicit rule in the formulation of monetary policy. With a rule, the FOMC would announce an explicit strategy that imposes discipline on period-by-period changes in its instrument, the funds rate. Specifically, the FOMC would specify a reaction function conditioning how it sets.   Orphanides, A and J C Williams () “Robust monetary policy rules with unknown natural rates”,Brookings Papers on Economic Activity, (2): 63– Reifschneider, D and J C Williams () “Three lessons for monetary policy in a low-inflation era”,Journal of Money, Credit, and Banking, 32(4/ 2): –

Robust monetary policy rules with unknown natural rates by Athanasios Orphanides Download PDF EPUB FB2

Robust Monetary Policy Rules with Unknown Natural Rates Athanasios Orphanides Board of Governors of the Federal Reserve System and John C. Williams Federal Reserve Robust monetary policy rules with unknown natural rates book of San Francisco December Abstract We examine the performance and robustness properties of alternative monetary policy rules.

Robust Monetary Policy Rules with Unknown Natural Rates The natural rate is an abstraction; like faith, it is seen by its works.

One can only say that if the bank policy succeeds in stabilizing. Robust Monetary Policy Rules with Unknown Natural Rates The natural rate is an abstraction; like faith, it is seen by its works. One can only say that if the bank policy succeeds in stabilizing prices, the bank rate must have been brought in line with the natural rate, but if it does not, it must not have been.I.

Request PDF | Robust Monetary Policy Rules with Unknown Natural Rates | We examine the performance and robustness properties of alternative monetary policy rules in. In principle, when aggregate demand and employment fall short of the economy's natural levels of output and employment, or when other deflationary concerns appear on the horizon, the central bank should ease monetary policy by bringing real interest rates below the economy's natural rate of.

lar simple rule that depends on the lagged federal funds rate and not on the natural rate of interest; they find little welfare loss and some robust-ness gain to such a rule over rules based on real-time estimates of natural rates in a wider range of models of the U.S.

economy.4 On the other hand. Robust Monetary Policy Rules with Unknown Natural Rates Author(s): Athanasios Orphanides and John C. Williams We examine the performance and robustness properties of alternative monetary policy rules in the presence of structural change that renders the natural rates Cited by: Athanasios Orphanides & John C.

Williams, "Robust Monetary Policy Rules with Unknown Natural Rates," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(2), pages Robust Monetary Policy Rules with Unknown Natural Rates (Brookings Papers on Economic Activity,No.

"Robust monetary policy rules with unknown natural rates," Working Paper SeriesFederal Reserve Bank of San Francisco, revised Athanasios Orphanides & John C. Williams, "Robust monetary policy rules with unknown natural rates," Finance and Economics Discussion SeriesBoard of Governors of the Federal Reserve System.

Simple and Robust Rules for Monetary Policy$ John B. Taylor and John C. Williams Stanford University Federal Reserve Bank of San Francisco Contents 1. Introduction 2. Historical Background 3. Using Models to Evaluate Simple Policy Rules Dynamic stochastic simulations of simple policy rules Optimal simple rules Robust monetary policy rules with unknown natural rates.

Athanasios Orphanides and John Williams (). NoFinance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.) Abstract: We examine the performance and robustness properties of alternative monetary policy rules in the presence of structural change that renders the natural rates of interest.

Abstract. The natural rate is an abstraction; like faith, it is seen by its works. One can only say that if the bank policy succeeds in stabilizing prices, the bank rate must have been brought in line with the natural rate, but if it does not, it must not have been.1 THE CONVENTIONAL PARADIGM for the conduct of monetary policy calls for the monetary authority to attain its objectives of a low.

Robust monetary policy rules with unknown natural rates. By Athanasios Orphanides and John C. Williams. Abstract. We examine the performance and robustness properties of alternative monetary policy rules in the presence of structural change that renders the natural rates of interest and unemployment uncertain.

Using a forward-looking quarterly. practice of monetary policy during this period changed in ways that incor-porated the key properties of the robust monetary policy rule.

The remainder of the chapter is organized as follows. Section exam-ines the narrative evidence of policymakers’ views on the natural rate of. "Robust Monetary Policy Rules with Unknown Natural Rates," Brookings Papers on Economic Activity, vol.

(December), pp. Phelps, Edmund S. "Money-Wage Dynamics and Labor-Market Equilibrium," Journal of Political Economy, vol. 76 (July/August, Part 2), pp.

Primiceri, Giorgio (). Robust Monetary Policy Rules with Unknown Natural Rates By Athanasios Orphanides and John C. Williams Download PDF ( KB). makers may disagree about the macroeconomic effects of monetary policy and thus about the appropriate policy setting. One approach to resolving this prob- lem is to search for monetary policy rules that work well across a wide range of structural models, that is, rules that are robust to model uncertainty.’ In this.

Robust Monetary Policy Rules with Unknown Natural Rates We examine the performance and robustness properties of alternative monetary policy rules in the presence of structural change that renders the natural rates of interest and unemployment uncertain.

Using a forward-looking quarterly model of the U.S. economy, estimated over the   One key issue for simple policy rules is the appropriate measure of inflation to include in the rule.

In many models (Levin et al.,Levin et al., ), simple rules that respond to smoothed inflation rates such as the one-year rate typically perform better than those that respond to the one-quarter inflation rate, even though the objective is to stabilize the one-quarter rate. 6. For a discussion of the properties of the first-difference rule, see Athanasios Orphanides and John C.

Williams (), "Robust Monetary Policy Rules with Unknown Natural Rates (PDF)," Brookings Papers on Economic Activity, no. 2, pp. Return to text. “Robust Monetary Policy Rules with Unknown Natural Rates.” Brookings Papers on Economic Activity, 33 (2): 63– Article Google Scholar.

Robust Monetary Policy Rules with Unknown Natural Rates by Athanasios Orphanides & John C. Williams; A Black Swan in the Money Market by John B.

Taylor & John C. Williams; A black swan in the money market by John B. Taylor & John C. Williams; Learning, expectations formation and the pitfalls of optimal control monetary policy. This paper proposes a novel two-step identification procedure of natural interest rate shocks.

Altogether, monetary policy and natural interest shocks explain about 90% of total inflation dynamics. The paper exploits (J.E. Arias et al., ) procedure, which allows getting canonical impulse response functions to monetary policy shocks. I find no evidence of price and output puzzles.

Robust Monetary Policy Rules with Unknown Natural Rates.” Brookings Papers on Economic Activity, (). Robust monetary policy rules with unknown natural rates Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) View citations () Also in Working Paper Series, Federal Reserve Bank of San Francisco () View citations () See also Journal Article in Brookings Papers on Economic Activity ().

The literature on monetary policy rules stretches back to at least Adam Smith and includes important contributions from David Ricardo, Knut Wicksell, and Milton recently, John Taylor has moved the research agenda forward with his eponymous rule, and a large number of academic papers have been written examining the effectiveness.

With the Federal Reserve widely expected to begin normalization of monetary policy in the wake of the Great Recession—perhaps in —an important question for public policy and private-sector planning is what the “new normal” for interest rates is likely to be. In particular, are real interest rates likely to be lower in the future than in recent decades.

"Robust Monetary Policy Rules With Unknown Natural Rates," Brookings Papers on Economic Activity, 2, Finally, there is a somewhat different concept of R* that is in common use in academic circles - specifically, the real rate of interest consistent with instantaneous market clearing in the absence of wage and price frictions.

Robust Monetary Policy Rules with Unknown Natural Rates.” (). Robust Monetary Policy with Competing Reference Models.” (). Robustness of Simple Monetary Policy Rules under Model Uncertainty.” In Monetary Policy Rules, (). See Orphanides, A and J.

Williams, (), “Robust Monetary Policy Rules with Unknown Natural Rates”, Brookings Papers on Economic Activity, Vol.2,Laubach, T and J.

Williams (), “Measuring the Natural Rate of Interest”, Review of Economics and Statist No4, ppLaubach, T and J. Williams, (), “Measuring the.The main finding is that a monetary policy rule in which the interest rate responds to inflation and real output more aggressively than it did in the s and s, or than during the time of.

Robust Rules for Monetary Policy and John C. Williams (). "Robust Monetary Policy Rules with Unknown Natural Rates," Brookings Papers on Economic Activity, no. 2, pp. 63 EDO, SIGMA (again various vintages) and others), (2) robustness to natural rate uncertainty, u*, r*, Q*, fx* and so on, (3) robustness to expectations formation.