Indicator Variables for Optimal Policy
2000 (English)Report (Other academic)
The optimal weights on indicators in models with partial information about the state of the economy and forward-looking variables are derived and interpreted, both for equilibria under discretion and under commitment. An example of optimal monetary policy with a partially observable potential output and a forward-looking indicator is examined. The optimal response to the optimal estimate of potential output displays certainty-equivalence, whereas the optimal response to the imperfect observation of output depends on the noise in this observation.
Place, publisher, year, edition, pages
Stockholm: IIES , 2000. , 53 p.
Seminar Paper / Institute for International Economic Studies, Stockholm University, ISSN 0347-8769 ; 688
Partial inflation, Kalman filter, monetary policy, discretion and commitment
IdentifiersURN: urn:nbn:se:su:diva-41165OAI: oai:DiVA.org:su-41165DiVA: diva2:328724