Designing a simple loss function for central banks: Does a dual mandate make sense?

Mostra el registre complet Registre parcial de l'ítem

• dc.contributor.author Debortoli, Davide
• dc.contributor.author Kim, Jinill
• dc.contributor.author Lindé, Jesper
• dc.contributor.author Nunes, Ricardo
• dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
• dc.date.accessioned 2020-05-25T09:26:56Z
• dc.date.available 2020-05-25T09:26:56Z
• dc.date.issued 2017-03-04
• dc.date.modified 2020-05-25T09:25:12Z
• dc.description.abstract Yes, it makes a lot of sense. This paper studies how to design simple loss functions for central banks, as parsimonious approximations to social welfare. We show, both analytically and quantitatively, that simple loss functions should feature a high weight on measures of economic activity, sometimes even larger than the weight on inflation. Two main factors drive our result. First, stabilizing economic activity also stabilizes other welfare relevant variables. Second, the estimated model features mitigated inflation distortions due to a low elasticity of substitution between monopolistic goods and a low interest rate sensitivity of demand. The result holds up in the presence of measurement errors, with large shocks that generate a trade-off between stabilizing inflation and resource utilization, and also when ensuring a low probability of hitting the zero lower bound on interest rates.
• dc.format.mimetype application/pdf*
• dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=1560
• dc.identifier.citation The Economic Journal, Vol.129, No 621, 2010-2038, July 2019, 10.1111/ecoj.12630
• dc.identifier.uri http://hdl.handle.net/10230/33883
• dc.language.iso eng
• dc.relation.ispartofseries Economics and Business Working Papers Series; 1560
• dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
• dc.rights.accessRights info:eu-repo/semantics/openAccess
• dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
• dc.subject.keyword central banks' objectives
• dc.subject.keyword simple loss function
• dc.subject.keyword monetary policy design
• dc.subject.keyword sticky prices and sticky wages
• dc.subject.keyword dsge models
• dc.subject.keyword Macroeconomics and International Economics
• dc.title Designing a simple loss function for central banks: Does a dual mandate make sense?
• dc.title.alternative
• dc.type info:eu-repo/semantics/workingPaper