Central Banker's Behaviour in an Uncertain Environment
Banque de France
Banque de France - Centre de Recherche
July 1, 2009
Banque de France Working Paper No. 241
Several recent papers are devoted to the examination of the central banker's behaviour in an uncertain economic environment. This paper proposes, from a central banker's point of view, a synthesis of the main sources of uncertainty as well as an illustration of their effects within an analytical framework. In particular, it shows that depending on the type of uncertainty and the choice of the selected loss function, the recommendations for monetary policy can be noticeably different. Retaining an ad hoc loss function - discretionary choice - in place of an endogenous loss function - choice consistent with the structural parameters - can involve considerable welfare losses.
Note: Downloadable document is in French.
Number of Pages in PDF File: 34
Keywords: Monetary policy, Uncertainty, Macroeconomic Model
JEL Classification: D81, E52, E61
Date posted: August 28, 2010