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Some Notes on Monetary Policy Rules with Uncertainty
2003
The author explores the role that Taylor-type rules can play in monetary policy, given the degree of uncertainty in the economy. The optimal rule is derived from a simple infinite-horizon model of the monetary transmission mechanism, with only additive uncertainty. The author then examines how this rule ought to be modified when there is uncertainty about the parameters, the time lags, and the nature of shocks. Quantitative evaluations are subsequently provided. In particular, it is shown that
doi:10.34989/swp-2003-16
fatcat:wwqmspioyvhmvbgbbgecgu7h2e