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- ISIDORE Id: 10670/1.c52265...
- emse-04624979
- doi: 10.1016/j.jfs.2023.101151
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info:eu-repo/semantics/altIdentifier/doi/10.1016/j.jfs.2023.101151
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Mots-clés
Behavioral macroeconomics Central bank policy Cognitive discounting Heterogeneous expectations Optimal simple rules E - Macroeconomics and Monetary Economics/E.E3 - Prices, Business Fluctuations, and Cycles/E.E3.E37 - Forecasting and Simulation: Models and Applications E - Macroeconomics and Monetary Economics/E.E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit/E.E5.E52 - Monetary Policy E - Macroeconomics and Monetary Economics/E.E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit/E.E5.E58 - Central Banks and Their Policies E - Macroeconomics and Monetary Economics/E.E7 - Macro-Based Behavioral Economics/E.E7.E70 - General -bio]/Neurons and Cognition [q-bio.NC]/Psychology and behavior -fin]/Risk Management [q-fin.RM]Sujets proches
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Jonathan Benchimol et al., « Optimal monetary policy under bounded rationality », HAL SHS (Sciences de l’Homme et de la Société), ID : 10.1016/j.jfs.2023.101151
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Résumé
We develop a behavioral New Keynesian model to analyze optimal monetary policy with heterogeneously myopic households and firms. Five key results are derived. First, our model reflects coherent microeconomic and aggregate myopia due to the consistent transition from subjective to objective expectations. Second, the optimal monetary policy entails implementing inflation targeting in a framework where myopia distorts agents' inflation expectations. Third, price level targeting emerges as the optimal policy under output gap, revenue, or interest rate myopia. Under price level targeting, rational inflation expectations are a minimal condition for optimality under bounded rationality. Fourth, bounded rationality is not necessarily welfare-decreasing and is even associated with welfare gains for extreme cognitive discounting. Finally, our empirical results point to the behavioral model's superiority over the rational model.
