Persistence-Dependent Optimal Policy Rules

Jean-Bernard Chatelain (1, 2) , Kirsten Ralf (3)

1 PSE - Paris School of Economics
2 PJSE - Paris Jourdan Sciences Economiques
3 Ecole Supérieure du Commerce Extérieur - ESCE

A policy target (for example inflation) may depend on the persistent component of exogenous shocks, such as the cost-push shock of oil, energy or imported prices. The larger the persistence of these exogenous shocks, the larger the welfare losses and the larger the response of policy instrument to this exogenous shock in a feedback rule, in order to decrease the sensitivity of the policy target to this shock.

Mots clés: Core inflation; Imported inflation; Optimal Policy; Welfare; Policy rule

Domaines: Economies et finances

Jean-Bernard Chatelain, Kirsten Ralf. Persistence-Dependent Optimal Policy Rules. 2020. ⟨halshs-02919697⟩