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Title: |
Monetary Neutrality and Optimality with
Symmetric Partial Information |
| Author: |
Courchane,
Marsha J.; Nickerson, David B. |
| Author
Affiliation: |
U British
Columbia |
| Source: |
International Economic Journal, Winter 1988, v. 2, no. 4, pp. 57-71 |
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Publication Date: |
Winter 1988 |
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Abstract: |
The neutrality and optimality of
countercyclical monetary policy are examined in a representative economy
featuring competetive equilibria in multiple markets and rational
expectations based on a form of private information about current
stochastic innovations in the economy. A necessary and sufficient
condition for the neutrality of monetary policy is stated in terms of
restrictions of the parameters of the linear rule describing prospective
monetary feedback. Optimal monetary policy is fully characterized in
terms of an alternative set of parameter restrictions. Optimal monetary
feedback completely stabilizes deviations in commodity output be
eliminating the influence of those current innovations about which
agents cannot directly observe from the rational expectations of agents. |
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