Resource title

Robustly optimal monetary policy with near-rational expectations

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Resource description

The paper considers optimal monetary stabilization policy in a forward-looking model, when the central bank recognizes that private-sector expectations need not be precisely modelconsistent, and wishes to choose a policy that will be as good as possible in the case of any beliefs that are close enough to model-consistency. It is found that commitment continues to be important for optimal policy, that the optimal long-run inflation target is unaffected by the degree of potential distortion of beliefs, and that optimal policy is even more historydependent than if rational expectations are assumed.

Resource author

Michael Woodford

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Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/25513

Resource license

Adapt according to the presented license agreement and reference the original author.