BibTeX
@MISC{Juillard05internationalmonetary,
author = {Michel Juillard and Douglas Laxton and Paolo Pesenti},
title = {International Monetary Fund},
year = {2005}
}
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Abstract
is particularly indebted to, for many useful remarks. The views expressed here are those of the authors, and do not necessarily re‡ect the position of the International Monetary Fund, the Federal Reserve Bank of New York, the Federal Reserve System, the European Central Bank, or any other We develop and estimate a stylized micro-founded model of the US economy. Next we compute the parameters of a simple interest rate policy rule that maximizes the unconditional mean of utility. We show that such a welfare-based rule lies close to the Taylor e ¢ ciency frontier. A counterfactual analysis assesses to what extent using such a rule as a guideline for monetary policy would have helped to avoid the in‡ationary swings of the 1970s and reduce the severity of boom and bust cycles. The paper also provides estimates of the welfare implications of business cycle variability and discusses their relevance.
Keyphrases
international monetary fund unconditional mean simple interest rate policy rule federal reserve bank new york counterfactual analysis business cycle variability many useful remark welfare implication european central bank bust cycle ationary swing federal reserve system monetary policy welfare-based rule taylor ciency frontier u economy stylized micro-founded model
