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A new approach for modelling and understanding optimal monetary policy. (English) Zbl 1255.91292

Summary: The coefficients of J. B. Taylor’s [“Discretion versus policy rules in practice”. Carnegie Rochester Conference Series on Public Policy 39, 195–214 (1993)] monetary policy rule can be seen as portfolio weights. Their optimal values are derived by adapting R. C. Merton’s [J. Econ. Theory 3, No. 4, 373–423 (1971; Zbl 1011.91502)] asset allocation model.

MSC:

91B64 Macroeconomic theory (monetary models, models of taxation)
93E20 Optimal stochastic control
90C15 Stochastic programming

Citations:

Zbl 1011.91502
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References:

[1] Merton, R. C., Optimum consumption and portfolio rules in a continuous-time model, Journal of Economic Theory, 3, 373-413 (1971) · Zbl 1011.91502
[2] Rudebusch, G. D.; Svensson, L. E.O., Policy rules for inflation targeting, CEPR Discussion Paper No 1999 (1998)
[3] Taylor, J. B., Discretion versus policy rules in practice, Carnegie Rochester Conference Series on Public Policy, 39, 195-214 (1993)
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