02374cam a22002657 4500001000700000003000500007005001700012008004100029100002200070245011500092260006600207490004200273500001900315520119000334530006101524538007201585538003601657690006501693690013301758700002301891710004201914830007701956856003802033856003702071w15757NBER20150701090925.0150701s2010 mau||||fs|||| 000 0 eng d1 aGiannoni, Marc P.10aOptimal Target Criteria for Stabilization Policyh[electronic resource] /cMarc P. Giannoni, Michael Woodford. aCambridge, Mass.bNational Bureau of Economic Researchc2010.1 aNBER working paper seriesvno. w15757 aFebruary 2010.3 aThis paper considers a general class of nonlinear rational-expectations models in which policymakers seek to maximize an objective function that may be household expected utility. We show how to derive a target criterion that is: (i) consistent with the model's structural equations, (ii) strong enough to imply a unique equilibrium, and (iii) optimal, in the sense that a commitment to adjust the policy instrument at all dates so as to satisfy the target criterion maximizes the objective function. The proposed optimal target criterion is a linear equation that must be satisfied by the projected paths of certain economically relevant "target variables". It takes the same form at all times and generally involves only a small number of target variables, regardless of the size and complexity of the model. While the projected path of the economy requires information about the current state, the target criterion itself can be stated without reference to a complete description of the state of the world. We illustrate the application of the method to a nonlinear DSGE model with staggered price-setting, in which the objective of policy is to maximize household expected utility. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web. 7aE52 - Monetary Policy2Journal of Economic Literature class. 7aE61 - Policy Objectives • Policy Designs and Consistency • Policy Coordination2Journal of Economic Literature class.1 aWoodford, Michael.2 aNational Bureau of Economic Research. 0aWorking Paper Series (National Bureau of Economic Research)vno. w15757.4 uhttp://www.nber.org/papers/w1575741uhttp://dx.doi.org/10.3386/w15757