University of Surrey

Test tubes in the lab Research in the ATI Dance Research

Robust Inflation-Targeting Rules and the Gains from International Policy Coordination

Levine, P, Pearlman, J and Welz, P Robust Inflation-Targeting Rules and the Gains from International Policy Coordination .

Full text not available from this repository.


This paper empirically assesses the performance of interest-rate monetary rules for interdependent economies characterized by model uncertainty. We set out a two-bloc dynamic stochastic general equilibrium model with habit persistence (that generates output persistence), Calvo pricing and wage-setting with indexing of non-optimized prices and wages (generating inflation persistence), incomplete financial markets and the incomplete pass-through of exchange rate changes. We estimate a linearized form of the model by Bayesian maximum-likelihood methods using US and Euro-zone data. From the estimates of the posterior distributions we then examine monetary policy conducted both independently and cooperatively by the Fed and the ECB in the form of robust inflation-targeting interest-rate rules. Comparing the utility outcome in a closed-loop Nash equilibrium with the outcome from a coordinated design of policy rules, we find a new result: the gains from monetary policy coordination rise significantly when CPI inflation targeting interest-rate rules are designed to account for model uncertainty.

Item Type: Other
Divisions : Surrey research (other units)
Authors :
Pearlman, J
Welz, P
Uncontrolled Keywords : E52, E37, E58, monetary policy coordination, robustness, inflation-targeting interest-rate rules.
Depositing User : Symplectic Elements
Date Deposited : 16 May 2017 15:14
Last Modified : 23 Jan 2020 10:26

Actions (login required)

View Item View Item


Downloads per month over past year

Information about this web site

© The University of Surrey, Guildford, Surrey, GU2 7XH, United Kingdom.
+44 (0)1483 300800