The timeless perspective concept was developed most prominently by but seems to be basically similar to the approach recommended by King and Wolman (1999). Some of the many prominent studies utilizing the concept include Benigno and Woodford (2005), Giannoni and Woodford (2005), and Svensson and Woodford (2005). Previous discussions of the concept include Blake (2001), Dennis (2001), Jensen (2001), Jensen and McCallum (2002), and McCallum and Nelson (2000).
Optimal Continuation versus the Timeless Perspective in Monetary Policy
Article first published online: 19 AUG 2010
© 2010 The Ohio State University
Journal of Money, Credit and Banking
Volume 42, Issue 6, pages 1093–1107, September 2010
How to Cite
JENSEN, C. and MCCALLUM, B. T. (2010), Optimal Continuation versus the Timeless Perspective in Monetary Policy. Journal of Money, Credit and Banking, 42: 1093–1107. doi: 10.1111/j.1538-4616.2010.00321.x
We are indebted to two anonymous referees whose suggestions helped us to improve the paper.
- Issue published online: 19 AUG 2010
- Article first published online: 19 AUG 2010
- Received March 6, 2006; and accepted in revised form February 25, 2010.
- timeless perspective;
- forward looking;
- policy rules
The timeless-perspective approach suggests that policymakers implement in each period policy actions conforming to a rule that would have been fully optimal to adopt in the distant past. A motivating advantage is that policy henceforth would continue by recommending the same optimality conditions if reconsidered, thereby enhancing credibility. We argue that continuation can alternatively be achieved with better results, on average, in terms of policymakers' objectives, by implementing in each period the time-invariant policy that is optimal from the viewpoint of the contemporary understanding of objectives and constraints, but while ignoring the conditions that happen to prevail at the time.