Journal Article
Designing monetary policy rules in an uncertain economic environment
Abstract: A well-designed monetary policy can help the economy respond efficiently to economic disturbances by limiting the deviation of economic activity from its potential while keeping inflation close to its desired rate. But successful implementation of such strategies must confront significant challenges arising from various forms of economic uncertainty. In this article, Michael Dotsey and Charles Plosser discuss the design of monetary policy rules in an environment in which policymakers face two distinct forms of uncertainty: the uncertainty surrounding the precise values of key policy variables that often appear as determinants in such rules, and learning uncertainty, which arises when people have only an incomplete knowledge of the economy itself.
Keywords: Monetary policy; Uncertainty;
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Bibliographic Information
Provider: Federal Reserve Bank of Philadelphia
Part of Series: Business Review
Publication Date: 2012
Issue: Q1
Pages: 1-9