01847cas a2200253 a 4500 AALejournalIMF019452 230101c9999 xx r poo 0 0eng d 5.00 USD 9781498324588 1018-5941 BD-DhAAL BD-DhAAL Benchimol, Jonathan. Optimal Monetary Policy Under Bounded Rationality / Jonathan Benchimol, Lahcen Bounader. Washington, D.C. : International Monetary Fund, 2019. 1 online resource (52 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students The form of bounded rationality characterizing the representative agent is key in the choice of the optimal monetary policy regime. While inflation targeting prevails for myopia that distorts agents' inflation expectations, price level targeting emerges as the optimal policy under myopia regarding the output gap, revenue, or interest rate. To the extent that bygones are not bygones under price level targeting, rational inflation expectations is a minimal condition for optimality in a behavioral world. Instrument rules implementation of this optimal policy is shown to be infeasible, questioning the ability of simple rules a la Taylor (1993) to assist the conduct of monetary policy. Bounded rationality is not necessarily associated with welfare losses. Mode of access: Internet Bounader, Lahcen. IMF Working Papers; Working Paper ; No. 2019/166 Full text available on IMF http://elibrary.imf.org/view/journals/001/2019/166/001.2019.issue-166-en.xml IMF e-Library