The source of uncertainty and optimal monetary policy

C-Tier
Journal: Economics Letters
Year: 2023
Volume: 227
Issue: C

Authors (2)

Score contribution per author:

0.503 = (α=2.01 / 2 authors) × 0.5x C-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

We study optimal monetary policy in response to the cost-push uncertainty shock, which is a second-moment shock, in a textbook New Keynesian model. Following a cost-push uncertainty shock, optimal monetary policy faces a trade-off between output gap and inflation stabilization. This is because, even in the absence of first-moment cost-push shocks, cost-push uncertainty generates a time-varying gap between natural output and efficient output. These results contrast with those under a conventional productivity uncertainty shock, which leads to complete stabilization of the output gap and inflation.

Technical Details

RePEc Handle
repec:eee:ecolet:v:227:y:2023:i:c:s0165176523001568
Journal Field
General
Author Count
2
Added to Database
2026-01-25