Imperfect knowledge and monetary policy / Otmar Issing [and others].

Includes bibliographical references (pages 122-135) and index.

Print version record.

Lecture 1. Monetary policy in uncharted territory -- 1.1. Introduction -- 1.2. Uncharted territory : unique historical events -- 1.3. Achieving price stability -- 1.4. Avoiding excess volatility in inflation, output, and the interest rate -- 1.5. Pragmatic monetarism : the Bundesbank -- 1.6. A stability-oriented strategy : the ECB -- 1.7. Conclusions -- Lecture 2. Imperfect knowledge, learning, and conservation -- 2.1. Introduction -- 2.2. Time inconsistency, cost-push shocks and Rogoff's conservatism -- 2.3. Empirical output gap uncertainty -- 2.4. Output gap uncertainty, learning, and conservatism -- 2.5. Different degrees of central bank knowledge and information -- 2.6. Conclusions.

"Based on lectures given as part of The Stone Lectures in Economics, this book discusses the problem of formulating monetary policy in practice, under the uncertain circumstances which characterize the real world. The first lecture highlights the limitations of decision rules suggested by the academic literature and recommends an approach involving, first, a firm reliance on the few fundamental and robust results of monetary economics and, secondly, a pragmatic attitude to policy implementation, taking into consideration lessons from central banking experience. The second lecture revisits Milton Friedman's questions about the effects of active stabilization policies on business cycle fluctuations. It explores the implications of a simple model where the policy maker has imperfect knowledge about potential output and the private sector forms expectations according to adaptive learning. This lecture shows that imperfect knowledge limits the scope for active stabilization policy and strengthens the case for conservatism."--Jacket.

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