Economics, Econometrics and Finance
5 years ago

Monetary policy with interest rates more effective in handling news shocks

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International Journal of Intelligent Unmanned Systems
News shocks modeling on monetary policies using dynamic stochastic general equilibrium (DSGE) model
Shapoor Zarei, Hussain Marzban, Ali Hussein Samadi, Ahmad Sadraei Javaheri

Paper Summary

The article investigates how news shocks affect monetary policies using a DSGE model. Two types of news shocks (technology and consumer preferences) are studied. The study shows that monetary policies using interest rates respond less to news shocks compared to those using the monetary base. The research suggests that optimal commitment policies result in lower social loss compared to discretionary policies. Overall, using interest rates in monetary policy is more effective in the presence of news shocks.

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