Estimates of the Effectiveness of Monetary Policy

29 Pages Posted: 20 Jun 2001

See all articles by Ray C. Fair

Ray C. Fair

Yale University - Cowles Foundation; Yale School of Management - International Center for Finance

Date Written: June 2003

Abstract

This paper examines various interest rate rules, as well as policies derived by solving optimal control problems, for their ability to dampen economic fluctuations caused by random shocks. A tax rate rule is also considered. A multicountry econometric model is used for the experiments. The results differ sharply from those obtained using recent models in which the coefficient on inflation in the nominal interest rate rule must be greater than one in order for the economy to be stable.

Keywords: Monetary Policy, Interest Rate Rules

JEL Classification: E52

Suggested Citation

Fair, Ray C., Estimates of the Effectiveness of Monetary Policy (June 2003). Yale ICF Working Paper No. 01-39; Cowles Foundation Discussion Paper No. 1298. Available at SSRN: https://ssrn.com/abstract=274017

Ray C. Fair (Contact Author)

Yale University - Cowles Foundation ( email )

Box 208281
New Haven, CT 06520-8281
United States
203-432-3715 (Phone)
203-432-6167 (Fax)

HOME PAGE: http://fairmodel.econ.yale.edu

Yale School of Management - International Center for Finance ( email )

Box 208200
New Haven, CT 06520
United States
203-432-3715 (Phone)
203-432-6167 (Fax)

HOME PAGE: http://fairmodel.econ.yale.edu

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