Imperfect Knowledge and Monetary Policy (The Stone Lectures in Economics) - Softcover

Gaspar, Vítor

Softcover

ISBN 10: 0521671078 ISBN 13: 9780521671071

Publisher: Cambridge University Press, 2006

Synopsis

Based on lectures given as part of The Stone Lectures in Economics, this book discusses the problem of formulating monetary policy in practice, under the uncertain circumstances which characterize the real world. The first lecture highlights the limitations of decision rules suggested by the academic literature and recommends an approach involving, first, a firm reliance on the few fundamental and robust results of monetary economics and, secondly, a pragmatic attitude to policy implementation, taking into consideration lessons from central banking experience. The second lecture revisits Milton Friedman's questions about the effects of active stabilization policies on business cycle fluctuations. It explores the implications of a simple model where the policy maker has imperfect knowledge about potential output and the private sector forms expectations according to adaptive learning. This lecture shows that imperfect knowledge limits the scope for active stabilization policy and strengthens the case for conservatism.

About this title

About the Authors

Otmar Issing is a member of the Executive Board, European Central Bank.

Vítor Gaspar is Special Advisor, Banco de Portugal.

Oreste Tristani is Principal Economist, DG Research, European Central Bank.

David Vestin is Economist, DG Research, European Central Bank.

Edition details

• Publisher: Cambridge University Press
• Publication date: 2006
• Language: English
• ISBN 10: 0521671078
• ISBN 13: 9780521671071
• Binding: Paperback
• Number of pages: 152