Monetary Policy Rules in Practice: Some International Evidence

47 Pages Posted: 21 Jul 2000 Last revised: 7 Oct 2010

See all articles by Richard Clarida

Richard Clarida

Columbia University - Graduate School of Arts and Sciences - Department of Eco; National Bureau of Economic Research (NBER)

Jordi Galí

Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI); Massachusetts Institute of Technology (MIT) - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Mark Gertler

New York University - Leonard N. Stern School of Business - Department of Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: November 1997

Abstract

This paper reports estimates of monetary policy reaction functions for two sets of" countries: the G3 (Germany, Japan, and the U.S.) and the E3 (UK, France that since 1979 each of the G3 central banks has pursued an implicit form of inflation targeting which may account for the broad success of monetary policy in those countries over this time" period. The evidence also suggests that these central banks have been forward looking: they" respond to anticipated inflation as opposed to lagged inflation. As for the E3 emergence of the influenced by German" monetary policy. Further, using the Bundesbank's policy rule as a benchmark time of the EMS collapse, interest rates in each of the E3 countries were much higher than" domestic macroeconomic conditions warranted. Taken all together, the results lend support to" the view that some form of inflation targeting may under certain circumstances be superior to" fixing exchange rates, as a means to gain a nominal anchor for monetary policy."

Suggested Citation

Clarida, Richard H. and Gali, Jordi and Gertler, Mark, Monetary Policy Rules in Practice: Some International Evidence (November 1997). NBER Working Paper No. w6254. Available at SSRN: https://ssrn.com/abstract=226012

Richard H. Clarida (Contact Author)

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