Online Appendix to "The Equivalence of Wage and Price Staggering in Monetary Business Cycle Models"

This appendix details the derivation of a number of results reported in "The Equivalence of Wage and Price Staggering in Monetary Business Cycle Models," which appears in the Review of Economic Dynamics.

How Useful Are Estimated DSGE Model Forecasts for Central Bankers?

bank, banker, DSGE, forecast, macroeconomic

Welfare-maximizing monetary policy under parameter uncertainty

This paper examines welfare-maximizing monetary policy in an estimated micro-founded general equilibrium model of the U.S. economy where the policymaker faces uncertainty about model parameters. Uncertainty about parameters describing preferences and technology implies not only uncertainty about the dynamics of the economy. It also implies uncertainty about the model's utility-based welfare criterion and about the economy's natural rate measures of interest and output. We analyze the characteristics and performance of alternative monetary policy rules given the estimated uncertainty regarding parameter estimates. We find that the natural rates of interest and output are imprecisely estimated. We then show that, relative to the case of known parameters, optimal policy under parameter uncertainty responds less to natural-rate terms and more to other variables, such as price and wage inflation and measures of tightness or slack that do not depend on natural rates.Monetary policy

New Financial Stability Governance Structures and Central Banks

Part of the Hutchins Center Working Papers Serie