Imperfect Knowledge and Monetary Policy (The Stone Lectures in Economics)

Cover......Page 1
Half-title......Page 3
Title......Page 7
Copyright......Page 8
Contents......Page 9
Figures and table......Page 11
Acknowledgments......Page 13
Introduction......Page 15
Outline of the two lectures......Page 21
1.1 Introduction......Page 26
1.2.1 The special nature of unique historical events......Page 29
1.2.2 Dealing with unique historical events......Page 34
1.3 Achieving price stability......Page 37
Anchoring expectations and the inflationary bias......Page 38
Anchoring expectations and endogenous expectations dynamics......Page 40
1.3.2 Anchoring expectations and key characteristics
of a strategy......Page 42
A public announcement......Page 43
Clearly understood inflation objective......Page 44
Ensuring that the level inflation objective is achieved......Page 46
A transparent communication framework......Page 50
1.4 Avoiding excess volatility in inflation, output, and the
interest rate......Page 52
1.4.1 Credibility redux......Page 53
1.4.2 More on measured vs. aggressive responses......Page 55
1.4.3 The horizon and financial stability......Page 57
1.5 Pragmatic monetarism: the Bundesbank......Page 61
1.5.1 The framework......Page 63
1.5.2 Monetary targeting at the time of German unification......Page 66
1.5.3 A number of distortions......Page 71
1.5.4 The Bundesbank’s monetary policy on the way to EMU......Page 74
1.6 A stability-oriented strategy: the ECB......Page 75
1.6.1 The framework......Page 77
1.6.2 Economic analysis and the elusive notion of output gap......Page 80
1.6.3 Monetary analysis and the (mis)behavior of money......Page 82
1.6.4 The experience of the single monetary policy after
five years......Page 86
1.7 Conclusions......Page 88
2.1 Introduction......Page 91
2.2 Time inconsistency, cost-push shocks and Rogoff’s
conservatism......Page 97
2.3 Empirical output gap uncertainty......Page 110
2.4 Output gap uncertainty, learning, and conservatism......Page 114
2.5 Different degrees of central bank knowledge
and information......Page 122
2.6 Conclusions......Page 128
Introduction......Page 131
Lecture 1: Monetary Policy In Uncharted territory......Page 132
Lecture 2: Imperfect Knowledge, Learning, And Conservatism......Page 133
References......Page 136
Index......Page 150