Optimal Monetary Policy Rules from a Timeless Perspective

Centre for Dynamic Macroeconomic Analysis Working Paper Series

13 Pages Posted: 27 Oct 2005

See all articles by Tatiana Damjanovic

Tatiana Damjanovic

University of St. Andrews - School of Economics and Finance

Vladislav Damjanovic

University of St. Andrews - School of Management

Charles Nolan

University of St. Andrews

Date Written: October 2005

Abstract

The timelessly optimal monetary policy proposed by Woodford (2003) may be dominated by alternative timeless policies. We provide a formal justification for these alternative policies. We demonstrate why discount rates do not matter and establish that optimizing over the unconditional expectation of the policy criterion function recovers these alternative strategies.

Keywords: Time consistency, unconditional expectation, timeless perspective, optimal monetary policy

JEL Classification: C61, E30, E52, E58, E61

Suggested Citation

Damjanovic, Tatiana and Damjanovic, Vladislav and Nolan, Charles, Optimal Monetary Policy Rules from a Timeless Perspective (October 2005). Centre for Dynamic Macroeconomic Analysis Working Paper Series, Available at SSRN: https://ssrn.com/abstract=827264 or http://dx.doi.org/10.2139/ssrn.827264

Tatiana Damjanovic

University of St. Andrews - School of Economics and Finance ( email )

The Scores, Castlecliff
St. Andrews, Fife KY16 9AL
United Kingdom

HOME PAGE: http://www.st-andrews.ac.uk/economics/staff/pages.t.damjanovic.shtml

Vladislav Damjanovic

University of St. Andrews - School of Management ( email )

The Gateway
Gateway
St. Andrews, Fife KY16 9SS
United Kingdom

Charles Nolan (Contact Author)

University of St. Andrews ( email )

North St
Saint Andrews, Fife KY16 9AJ
United Kingdom