Robustness of Simple Monetary Policy Rules under Model Uncertainty

摘要

In this paper, we investigate the properties of alternative monetary policy rules211u001eusing four structural macroeconometric models: the Fuhrer-Moore model, Taylor's 211u001eMulti-Country Model, the MSR model of Orphanides and Wieland, and the FRB staff 211u001emodel. All four models incorporate the assumptions of rational expectations, 211u001eshort-run nominal inertia, and long-run monetary neutrality, but differ in many 211u001eother respects (e.g., the dynamics of prices and real expenditures). We compute 211u001ethe output-inflation volatility frontier of each model for alternative 211u001especifications of the interest rate rule, subject to an upper bound on nominal 211u001einterest rate volatility. Our analysis provides strong support for rules in which 211u001ethe first-difference of the federal funds rate responds to the current output gap 211u001eand the deviation of the one-year average inflation rate from a specified target.