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Comparison: Westelius (2009, JEDC) vs. "Managing Beliefs ..."

posted Nov 14, 2011, 2:39 PM by Elmar Mertens
Westelius (2009, JEDC) studies the consequences of intransparent output targets in a simple New Keynesian Model. The model is identical to the simple model used to illustrate the optimal policy in my "Managing Beliefs about Monetary Policy under Discretion", but the policies differ substantially.

Westelius has policy follow the targeting rule, which would be optimal when the policy targets were fully transparent. In contrast, my paper derives the optimal policy when the targets are intransparent.

The two policies are compared in this little note (pdf).