Some Political Economy of Monetary Rules

Independent Review 23(1) 2016: 443-464

33 Pages Posted: 8 Oct 2015 Last revised: 2 Dec 2016

See all articles by Alexander William Salter

Alexander William Salter

Texas Tech University - Rawls College of Business; American Institute for Economic Research

Date Written: December 1, 2016


This paper compares various proposals for monetary policy rules according to the standard of political economy. It first presents an argument for why rules-based monetary policy is preferable to discretionary policy. Next it discusses at a general level two kinds of rules: those that can be implemented with minimal changes to current monetary institutions, that is, central banking, and those that would require significant institutional changes to implement. The paper closes by calling for a re-orientation of modern macroeconomic and monetary discourse away from economic control and towards the rule of law, whereby the politically inexpediency of the latter proposals becomes an asset.

Keywords: Bennett McCallum, central banking, free banking, John Taylor, Milton Friedman, monetary policy, monetary theory, nominal income targeting, rule of law, rules vs. discretion

JEL Classification: A2, E42, E5, P16

Suggested Citation

Salter, Alexander William, Some Political Economy of Monetary Rules (December 1, 2016). Independent Review 23(1) 2016: 443-464. Available at SSRN:

Alexander William Salter (Contact Author)

Texas Tech University - Rawls College of Business ( email )

Lubbock, TX 79409
United States


American Institute for Economic Research

PO Box 1000
Great Barrington, MA 01230
United States

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