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Money Growth Monitoring and the Taylor Rule

66 Pages Posted: 11 Oct 2001  

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)

Date Written: October 2001

Abstract

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.

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: https://ssrn.com/abstract=286964

Lawrence J. Christiano (Contact Author)

Northwestern University ( email )

2003 Sheridan Road
Evanston, IL 60208
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847-491-8231 (Phone)
847-491-7001 (Fax)

Federal Reserve Bank of Cleveland

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Federal Reserve Bank of Chicago

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Federal Reserve Bank of Minneapolis

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National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

Massimo Rostagno

European Central Bank (ECB) ( email )

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D-60311 Frankfurt am Main
Germany
+49 69 1344 7663 (Phone)
+49 69 1344 7604 (Fax)

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