TY  - JOUR
AU  - Basu,Susanto
AU  - Kimball,Miles S.
AU  - Mankiw,N. Gregory
AU  - Weil,David N.
TI  - Optimal Advice for Monetary Policy
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3054
PY  - 1990
Y2  - March 1990
UR  - http://www.nber.org/papers/w3054
L1  - http://www.nber.org/papers/w3054.pdf
N1  - Author contact info:
Susanto Basu
Department of Economics
Boston College
140 Commonwealth Avenue
Chestnut Hill, MA 02467
Tel: 617/552-2182
Fax: 617/552-2308
E-Mail: susanto.basu@bc.edu

Miles S. Kimball
Department of Economics
University of Michigan
Ann Arbor, MI  48109-1220
Tel: 734/764-2375
Fax: 734/764-2769
E-Mail: mkimball@umich.edu

N. Gregory Mankiw
Department of Economics
Littauer 223
Harvard University
Cambridge, MA  02138
Tel: 617/495-4301
Fax: 617/495-7730
E-Mail: ngmankiw@fas.harvard.edu

David N. Weil
Department of Economics
Box B
Brown University
Providence, RI 02912
Tel: 401/863-1754
Fax: 401/863-1970
E-Mail: david_weil@brown.edu
AB  - This paper addresses the issue of how to give optimal advice about monetary policy when it is known that the advice may not be heeded. We examine a simple macroeconomic model in which monetary policy has the ability to stabilize output by offsetting exogenous shocks to aggregate demand. The optimal policy rule for such a model is easily derived. But an adviser who knows that his advice may not be followed should not recommend the optimal policy rule. This is true because, in giving activist advice, such an adviser increases uncertainty about what monetary policy will be followed. We solve for the rule that such an adviser should use in giving advice.
ER  -