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Money Growth Monitoring and the Taylor Rule

Lawrence J. Christiano

Northwestern University; Federal Reserve Bank of Cleveland; Federal Reserve Bank of Chicago; Federal Reserve Bank of Minneapolis; National Bureau of Economic Research (NBER)

Massimo Rostagno

European Central Bank (ECB)

October 2001

NBER Working Paper No. w8539

Using a series of examples, we review the various ways in which a monetary policy characterized by the Taylor rule can inject volatility into the economy. In the examples, a particular modification to the Taylor rule can reduce or even entirely eliminate the problems. Under the modified policy, the central bank monitors the money growth rate and commits to abandoning the Taylor rule in favor of a money growth rule in case money growth passes outside a particular monitoring range.

Number of Pages in PDF File: 66

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Date posted: October 11, 2001  

Suggested Citation

Christiano, Lawrence J. and Rostagno, Massimo, Money Growth Monitoring and the Taylor Rule (October 2001). NBER Working Paper No. w8539. Available at SSRN: http://ssrn.com/abstract=286964

Contact Information

Lawrence J. Christiano (Contact Author)
Northwestern University ( email )
2003 Sheridan Road
Evanston, IL 60208
United States
847-491-8231 (Phone)
847-491-7001 (Fax)
Federal Reserve Bank of Cleveland
East 6th & Superior
Cleveland, OH 44101-1387
United States
Federal Reserve Bank of Chicago
230 South LaSalle Street
Chicago, IL 60604
United States
Federal Reserve Bank of Minneapolis
90 Hennepin Avenue
Minneapolis, MN 55480
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Massimo Rostagno
European Central Bank (ECB) ( email )
Kaiserstrasse 29
Postfach 16 03 19
D-60311 Frankfurt am Main
+49 69 1344 7663 (Phone)
+49 69 1344 7604 (Fax)

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