Please use this identifier to cite or link to this item: https://repositorio.insper.edu.br/handle/11224/5769
Type: Working Paper
Title: Robust Monetary Policy with the Consumption-Wealth Channel
Author: Araújo, Eurilton
Publication Date: 2008
Abstract: This paper studies how changes in the preference for robustness(central bank‘s concerns about model uncertainty) and in the size of wealth effects affect the design of optimal monetary policy rules in the Blanchard-Yaari framework with sticky prices. First, I present analytical solutions by as suming that all exogenous disturbances are white noise. It is shown that an increased preference for robustness and stronger wealth effects imply more aggressive policy responses to cost shocks. In addition, the monetary policy design problem is isomorphic to the same problem in the standard New Keynesian framework. Then, I use numerical methods to study the case of persistent shocks. It is shown that an increased preference for robustness continues to imply more aggressive responses to cost shocks. By contrast, stronger wealth effects lead to less aggressive responses.
Keywords (english terms): optimal monetary policy
robustness
wealth effects
Language: Inglês
CNPq Area: Ciências Sociais Aplicadas
Copyright: O INSPER E ESTE REPOSITÓRIO NÃO DETÊM OS DIREITOS DE USO E REPRODUÇÃO DOS CONTEÚDOS AQUI REGISTRADOS. É RESPONSABILIDADE DO USUÁRIO VERIFICAR OS USOS PERMITIDOS NA FONTE ORIGINAL, RESPEITANDO-SE OS DIREITOS DE AUTOR OU EDITOR
Appears in Collections:Coleção Insper Working Papers

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