Monetary Policy in an Uncertain Environment

13 Pages Posted: 26 Sep 2003 Last revised: 5 Nov 2010

See all articles by Martin S. Feldstein

Martin S. Feldstein

National Bureau of Economic Research (NBER) (deceased); Harvard University (deceased)

Date Written: September 2003

Abstract

This paper discusses the nature of the uncertainty faced by central banks and considers three approaches to dealing with uncertainty(1) formal optimization models and robust rules based on such models; (2) informal rules like the Taylor rule and inflation targeting; and (3) a case by case approach based on an informal Bayesian logic. The latter case requires considering the asymmetric nature of the risks that the central bank often faces.

Suggested Citation

Feldstein, Martin S., Monetary Policy in an Uncertain Environment (September 2003). NBER Working Paper No. w9969, Available at SSRN: https://ssrn.com/abstract=447257

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