We would like to thank Katrin Assenmacher-Wesche, Alex Cukierman, Stefan Gerlach, Oliver Grimm, Heinz Hermann, Marina Iozef, Thomas Lanz, Anne Sibert, Tommy Sveen, Lars Svensson, Kamali Wickramage, participants of the Deutsche Bundesbank/Bank of Finland Conference “Designing Central Banks,” 2007, participants of the SNB research conference on “Alternative Models for Monetary Policy Analysis,” 2008, two anonymous referees, and Kenneth West, the editor, for many valuable comments and suggestions.
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Monetary Policy Inclinations
Article first published online: 28 NOV 2011
DOI: 10.1111/j.1538-4616.2011.00464.x
© 2011 The Ohio State University
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How to Cite
GERSBACH, H. and HAHN, V. (2011), Monetary Policy Inclinations. Journal of Money, Credit and Banking, 43: 1707–1717. doi: 10.1111/j.1538-4616.2011.00464.x
Publication History
- Issue published online: 28 NOV 2011
- Article first published online: 28 NOV 2011
- Received July 2, 2009; and accepted in revised form April 28, 2011.
- Abstract
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Keywords:
- E58
- central banks;
- transparency;
- Federal Reserve;
- ECB;
- policy inclinations
We examine whether central banks should complement their inflation forecasts with interest rate projections. Introducing a central bank loss function that accounts for deviations from announcements, we incorporate the publication of policy inclinations into a dynamic monetary model. We show that in the presence of cost-push shocks, the publication of interest rate forecasts tends to improve welfare.