Sophisticated monetary policies

Research output: Contribution to journalArticle

21 Citations (Scopus)

Abstract

In standard monetary policy approaches, interest-rate rules often produce indeterminacy. A sophisticated policy approach does not. Sophisticated policies depend on the history of private actions, government policies, and exogenous events and can differ on and off the equilibrium path. They can uniquely implement any desired competitive equilibrium. When interest rates are used along the equilibrium path, implementation requires regime-switching. These results are robust to imperfect information. Our results imply that the Taylor principle is neither necessary nor sufficient for unique implementation. They also provide a direction for empirical work on monetary policy rules and determinacy.

Original languageEnglish (US)
Pages (from-to)47-89
Number of pages43
JournalQuarterly Journal of Economics
Volume125
Issue number1
DOIs
StatePublished - Feb 1 2010

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Monetary policy
Regime switching
Interest rates
Determinacy
Taylor principle
Government policy
Imperfect information
Indeterminacy
Monetary policy rules
Interest rate rules
Competitive equilibrium

Cite this

Sophisticated monetary policies. / Atkeson, Andrew; Chari, Varadarajan V.; Kehoe, Patrick J.

In: Quarterly Journal of Economics, Vol. 125, No. 1, 01.02.2010, p. 47-89.

Research output: Contribution to journalArticle

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