Selected Publications
The Power of Open-Mouth Policies
Vadym Lepetyuk, Lilia Maliar, Serguei Maliar and John B. Taylor
Abstract
Central banks’ announcements about future monetary policy make economic agents to react before the announced policy takes place. We evaluate the anticipation e ects of such announcements in a realistically calibrated prototypical central banking model. We consider temporary and permanent anticipated changes in policy rules including in ation target and Taylor-rule coecients, as well as anticipated switches from in ation targeting to price-level targeting and average-in ation targeting, and we nd economically signi cant e ects. Our methodological contribution is to develop a novel perturbation-based extended function path (EFP) framework for constructing nonstationary solutions (time-dependent decision functions) to economic models with anticipated non-Markov news shocks.