سیاست های پولی برای اقتصادی با دقت پایین

We offer a contribution to the analysis of optimal monetary policy. We begin with a critical assessment of the existing literature, arguing that most work is based on implausible models of inflation–output dynamics. We then suggest that this problem may be solved with some recent behavioral models, which assume that price setters are slow to incorporate macroeconomic information into the prices they set. A specific such model is developed and used to derive optimal policy. In response to shocks to productivity and aggregate demand, optimal policy is price level targeting. Base drift in the price level, which is implicit in the inflation targeting regimes currently used in many central banks, is not desirable in this model. When shocks to desired markups are added, optimal policy is flexible targeting of the price level. That is, the central bank should allow the price level to deviate from its target for a while in response to these supply shocks, but it should eventually return the price level to its target path. Optimal policy can also be described as an elastic price standard: the central bank allows the price level to deviate from its target when output is expected to deviate from its natural rate.

What policy rule should a central bank follow? Recent years have seen a resurgence of theoretical research on this classic question. Most of this work has built on “new Keynesian” models of the output–inflation trade-off derived from forward-looking models of staggered price adjustment. Unfortunately, these models make implausible predictions about the effects of monetary policy: for example, they imply that a policy change that gradually reduces inflation causes an output boom. There is therefore good reason to be skeptical about what the literature tells us about the effects of alternative policies. This article tries to make progress toward determining which policies are optimal by studying this question in a model that more closely fits the facts about monetary policy. In particular, we draw on recent behavioral models of the output–inflation trade-off based on the assumption that agents are slow to incorporate information about macroeconomic conditions, even if the information is publicly available. Recent work has shown that such models capture the inertia that is central to inflation dynamics in modern economies. These models should provide more reliable insights into the policy choices facing central banks. Section 2 briefly reviews the two literatures on which our work builds, the work on optimal monetary policy and the work on behavioral macroeconomics. Section 3 presents a specific model, which builds on the “sticky information” model of Mankiw and Reis (2002), and Section 4 discusses the determinants of welfare in this model. Sections 5–7 derive the optimal policy rules in the model. Section 8 compares our results with those obtained from the standard new Keynesian Phillips curve. Section 9 concludes. Our central result is that price level targeting is the optimal policy in the model. Inflation targeting—the currently popular policy of allowing base drift in the price level—is suboptimal. When the economy is hit by shocks to aggregate demand or productivity, strict price level targeting is optimal: policymakers should return the price level to a pre-determined path as quickly as possible. However, if there are persistent shocks to firms’ markups, the optimal rule allows temporary deviations from the long-run price target. In this way, the prescriptions of our model are similar to the practice of many central banks, which allow temporary deviations from policy rules in response to “supply shocks.” One can also describe optimal policy as the elastic price standard proposed by Hall (1984). Under this policy, the price level can deviate from target as long as output is expected to deviate from its natural rate.

According to the model developed here, optimal monetary policy can be described as flexible targeting of the price level. The central bank should announce a target path of the price level and then commit itself to returning to this path in response to shocks. In response to shocks to demand or productivity, it should return the price level as quickly as possible to its target. In response to shocks to markups, which here reflect a type of supply shock, the central bank should return the price level to its target more gradually over time. Described differently, optimal policy allows the price level to deviate from its target only if output is expected to deviate from its natural rate. The optimality of targeting the price level rather than the inflation rate is a common theme in the recent literature on monetary policy. For example, Hall (1984) and Hall and Mankiw (1994) argue that a price level target would aid personal financial planning by making the cost of living far in the future more predictable. Svensson (1999) and Vestin (1999) argue for price level targeting on the grounds that it would help solve some of the time-inconsistency problems associated with discretionary monetary policy. Cover and Pecorino (2001) claim that a price target is stabilizing because any inflationary shock automatically causes a decrease in expected inflation and thus an increase in the real interest rate. The analysis in this article is very different. Our households have no money illusion in financial planning, our monetary policymaker can commit to a policy rule, and we omit the effect of expected inflation on aggregate demand. Nonetheless, the bottom line for policy is the same: central banks should target the price level, not the inflation rate. These results leave open an intriguing question: Why have central banks adopted inflation targeting if price level targeting has all these desirable properties? One possible answer is that central bankers know something about the world that is missing in these theories of optimal policy. But another possibility is that central bankers have been misled by assuming, incorrectly, that some features of the recent monetary regime are structural, while in fact these features would change if policy did. Price dynamics are the natural place to look for such a mistaken assumption. The recent data are well described by a backward-looking Phillips curve. If this equation for price dynamics were invariant to policy, then inflation targeting would be optimal, and price level targeting would be unattractive (Ball, 1999). But a radical change in the monetary policy rule, such as a target for the price level, would most likely alter the reduced-form equation for the Phillips curve. Whether the particular behavioral model we have examined in this article correctly captures the shift that would occur is open to debate. But the results presented here suggest the issue is well worth pursuing, for the implications for monetary policy could not be more profound.