Conference Paper
Indicator variables for optimal policy
Abstract: 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.
Keywords: Forecasting; Monetary policy;
Status: Published in Structural change and monetary policy : a conference (2000: March 3-4)
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Bibliographic Information
Provider: Federal Reserve Bank of San Francisco
Part of Series: Proceedings
Publication Date: 2000