A Quantitative Analysis of Optimal Sustainable Monetary Policies

Posted: 6 Jun 2013 Last revised: 22 Sep 2015

See all articles by Takeki Sunakawa

Takeki Sunakawa

Hitotsubashi University - Graduate School of Economics

Date Written: December 23, 2014


This study examines the quantitative properties of optimal sustainable monetary policies using a monetary model with a stabilization bias. As in Kurozumi (2008), the optimal sustainable policy is a strategy considered in the absence of commitment technologies; however it is implemented following an optimal quasi-sustainable policy derived by assuming that the commitment technologies are present. This study finds that solving for the policy function of the optimal quasi-sustainable policy yields a result basically identical to the Ramsey-optimal commitment policy under a set of parameters commonly used in the literature. The simulation shows two further results: policymakers have incentive to deviate from the Ramsey-optimal commitment policy when the lagged output gap is large and the optimal quasi-sustainable policy endogenously diminishes the steadfastness of policymakers' commitment.

Keywords: Optimal monetary policy, Time inconsistency, Sustainable plans, Timeless perspective

JEL Classification: E52, E58, E61

Suggested Citation

Sunakawa, Takeki, A Quantitative Analysis of Optimal Sustainable Monetary Policies (December 23, 2014). Journal of Economic Dynamics and Control (2015), 52, 119-135, Available at SSRN: https://ssrn.com/abstract=2274870 or http://dx.doi.org/10.2139/ssrn.2274870

Takeki Sunakawa (Contact Author)

Hitotsubashi University - Graduate School of Economics ( email )

Naka 2-1
Kunitachi, Tokyo 186-8601

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