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Working Paper
Monetary Rule, Central Bank Loss and Household’s Welfare: an Empirical Investigation
Which monetary policy rule best fits the historical data? Which rule is most effective to reach the central bank?s objectives? Is minimizing a central bank loss equivalent to maximizing households? welfare? Are NGDP growth or level targeting good options, and if so, when? Do they perform better than Taylor-type rules? In order to answer these questions, we use Bayesian estimations to evaluate the Smets and Wouters (2007) model under nine monetary policy rules with US data ranging from 1955 to 2017 and over three different sub-periods (among them the zero lower bound period where a shadow rate ...