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Durham University

Research & business

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Publication details

Damjanovic, T., Damjanovic, V. & Nolan, C. (2015). Ordering Policy Rules with an Unconditional Welfare Measure. International Journal of Central Banking 11(1): 103-149.

Author(s) from Durham


The unconditional expectation of social welfare is often
used to assess alternative macroeconomic policy rules in
applied quantitative research. This paper provides a detailed
analysis of such policies. It sets out the unconditionally optimal
(UO) policy problem and derives a linear-quadratic (LQ)
version of that problem that approximates the exact non-linear
problem. The properties of UO policies are analyzed through a
series of examples and contrasted with the timeless perspective
(TP), exposited in Benigno and Woodford (2012). Some substantive
implications for optimal monetary policy are explored.