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Testing for optimal monetary policy via moment inequalities

Coroneo, Laura, Corradi, Valentina and Santos Monteiro, Paulo (2018) Testing for optimal monetary policy via moment inequalities Journal of Applied Econometrics.

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The specification of an optimizing model of the monetary transmission mechanism requires selecting a policy regime, commonly commitment or discretion. In this paper, we propose a new procedure for testing optimal monetary policy, relying on moment inequalities that nest commitment and discretion as two special cases. The approach is based on the derivation of bounds for inflation that are consistent with optimal policy under either policy regime. We derive testable implications that allow for specification tests and discrimination between the two alternative regimes. The proposed procedure is implemented to examine the conduct of monetary policy in the United States economy.

Item Type: Article
Divisions : Faculty of Arts and Social Sciences > School of Economics
Authors :
Coroneo, Laura
Santos Monteiro, Paulo
Date : 2018
Funders : Economic and Social Research Council (ESRC)
Identification Number : 10.1002/jae.2629
Copyright Disclaimer : Copyright © 2018 John Wiley & Sons, Ltd.
Uncontrolled Keywords : Bootstrap; GMM; Moment Inequalities; Optimal Monetary Policy
Depositing User : Clive Harris
Date Deposited : 01 Mar 2018 14:21
Last Modified : 26 Jul 2018 12:27

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