Looking for an Optimal Monetary Policy Rule: The Case of Poland under IT Framework

Abstract

The aim of the paper is to check the influence of the degree of forward-lookingness of economic agents on the optimal monetary policy rules, using several versions of a small, highly aggregated structural model describing the transmission mechanism in the spirit of the New Keynesian School. We show the optimal policy rule with the monetary authority loss function as an optimality criterion. We also study changes in the optimal policy rule resulting from the varying degree of forward-lookingness in the model and investigate the nature of the formal relationship between the degree of forward-lookingness of the model and the shape of the optimal monetary policy rule.