Monetary Policy Strategies
41 Pages Posted: 2 Aug 2010 Last revised: 29 Jul 2022
There are 2 versions of this paper
Date Written: November 1988
Abstract
The paper considers the merits of rules and discretion for monetary policy when the structure of the macroeconomic model and the probability distributions of disturbances are not well defined. It is argued that when it is costly to delay policy reactions to seldom-experienced shocks until formal algorithmic learning has been accomplished, and when time consistency problems are significant, a mixed strategy that combines a simple verifiable rule with discretion is attractive. The paper also discusses mechanisms for mitigating credibility problems and emphasizes that arguments against various types of simple rules lost their force under a mixed strategy.
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
The Determinants of the Choice between Fixed and Flexible Exchange-Rate Regimes
-
The Political Economy of Infaliton and Stabilization in Developing Countries
-
Do the Benefits of Fixed Exchange Rates Outweigh Their Costs? The Franc Zone in Africa
By Dani Rodrik and Shantayanan Devarajan
-
Nominal Interest Rate Pegging Under Alternative Expectations Hypotheses
By Joseph Gagnon and Dale W. Henderson
-
Political Instability, Political Weakness and Inflation: An Empirical Analysis
By Sebastian Edwards and Guido Tabellini
-
Why White, Not Keynes? Inventing the Postwar International Monetary System
-
Deconstructing the Functioning of Political Manipulation of the Economy in Turkey