Ordering Policy Rules with an Unconditional Welfare Measure

Damjanovic, T.; Damjanovic, V.; Nolan, C.

Abstract

The unconditional expectation of social welfare is often used to assess alternative macroeconomic policy rules in applied quantitative research. This paper provides a detailed analysis of such policies. It sets out the unconditionally optimal (UO) policy problem and derives a linear-quadratic (LQ) version of that problem that approximates the exact non-linear problem. The properties of UO policies are analyzed through a series of examples and contrasted with the timeless perspective (TP), exposited in Benigno and Woodford (2012). Some substantive implications for optimal monetary policy are explored.

Citation

Damjanovic, T., Damjanovic, V., & Nolan, C. (2015). Ordering Policy Rules with an Unconditional Welfare Measure. International journal of central banking, 11(1), 103-149

• Journal Article Type: Article
• Online Publication Date: Jan 31, 2015
• Publication Date: Jan 1, 2015
• Deposit Date: Apr 15, 2015
• Publicly Available Date: Nov 14, 2017
• Journal: International Journal of Central Banking
• Print ISSN: 1815-4654
• Electronic ISSN: 1815-7556
• Publisher: Association of the International Journal of Central Banking
• Peer Reviewed: Peer Reviewed
• Volume: 11
• Issue: 1
• Pages: 103-149
• Public URL: https://durham-repository.worktribe.com/output/1443149
• Publisher URL: http://www.ijcb.org/journal/ijcb15q1a4.htm