A linear system of rational expectations of the optimal discretionary monetary policy
DOI:
https://doi.org/10.33110/rnee.v16i1.323Keywords:
impulse-response functions, New Keynesian model, optimal monetary policy, rational expectations, Schur decompositionAbstract
One restriction oflinear models ofrational expectations is that they do not always have a closed solution. Despite this, it is instructive to obtain a numerical solution of the stochastic model. This contribution exposes the optimal discretionary monetary policy mechanism under uncertainty in terms of a linear system of rational expectations. Far this, we take into account the Clarida's model, et al. (1999), we reproduce its analytical solution, although we also show sorne numerical results of the model far certain values of the parameters. The characterization of the optimal monetary policy of an inflation-adverse or output-employment-loving central bank is possible thanks to the impulse-response functions far a negative aggregate supply shock of a high or low persistence level.
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