Simulating the Effects of Some Simple Coordinated Versus Uncoordinated Policy Rules

43 Pages Posted: 15 Feb 2006

See all articles by Jacob A. Frenkel

Jacob A. Frenkel

Merrill Lynch & Co. - Sovereign Advisory Group and Global Financial Institutions Group; National Bureau of Economic Research (NBER)

Paul R. Masson

International Monetary Fund (IMF) - Research Department; The Brookings Institution

Date Written: February 21, 1989

Abstract

Effects of different policy rules are simulated: uncoordinated targeting of the money supply or nominal income, use of monetary policy to achieve coordinated targets for nominal or real exchange rates, and the use of monetary and fiscal policies to hit targets for internal and external balance. The following conclusions emerge: rules which performed best for some shocks performed poorly for others; monetary policy was ineffective in limiting movements in real exchange rates; unconstrained use of fiscal policy was quite powerful in influencing real variables; and dynamic instability was a potentially serious problem. Robustness to different specifications and to constraints on instruments remains to be examined.

JEL Classification: 430

Suggested Citation

Frenkel, Jacob A. and Masson, Paul R., Simulating the Effects of Some Simple Coordinated Versus Uncoordinated Policy Rules (February 21, 1989). Available at SSRN: https://ssrn.com/abstract=884620 or http://dx.doi.org/10.2139/ssrn.884620

Jacob A. Frenkel (Contact Author)

Merrill Lynch & Co. - Sovereign Advisory Group and Global Financial Institutions Group

New York, NY
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Paul R. Masson

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

The Brookings Institution ( email )

1775 Massachusetts Ave. NW
Washington, DC 20036-2188
United States
202-797-6278 (Phone)
202-797-2968 (Fax)

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