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    Discretion vs. timeless perspective under model-consistent stabilization objectives

    Petrella, Ivan and Rossi, R. and Santoro, E. (2013) Discretion vs. timeless perspective under model-consistent stabilization objectives. Working Paper. Birkbeck College, University of London, London, UK.

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    This paper contributes to a recent debate about the structural and institutional conditions under which discretion may be superior to timeless perspective. We show this is unlikely when the policy maker relies on a welfare-theoretic loss function obtained as a second-order approximation of households’utility, even in the presence of features that should enhance the relative performance of discretionary policy-making in the baseline New Keynesian model. This result stands in contrast to the existing studies, whose analysis has typically relied on ad hoc welfare criteria that reject neither households’preferences, nor the degree of rigidity in price-setting.


    Item Type: Monograph (Working Paper)
    Additional Information: BWPEF 1306, ISSN: 1745-8587
    Keyword(s) / Subject(s): Monetary Policy, Discretion, Timeless Perspective, Loss of Social Welfare
    School: Birkbeck Faculties and Schools > Faculty of Business and Law > Birkbeck Business School
    Depositing User: Administrator
    Date Deposited: 30 Oct 2013 14:12
    Last Modified: 02 Aug 2023 17:08


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