The Rules-Discretion Cycle in Monetary and Fiscal Policy
AbstractThis lecture starts with a review of historical trends in the balance between rules and discretion: first toward more discretionary policies in the 1960s and 1970s; second toward more rules-based policies in the 1980s and 1990s; and third back again toward discretion in recent years. In each of these swings, monetary policy and fiscal policy moved in the same direction. These swings are correlated with economic performance—unemployment, inflation, economic and financial stability, the frequency and depths of recessions, the length and strength of recoveries. The lecture then provides evidence that the correlation is causal with the moves toward more rules-based policies improving economic performance.
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Bibliographic InfoArticle provided by Finnish Economic Association in its journal Finnish Economic Papers.
Volume (Year): 24 (2011)
Issue (Month): 2 (Autumn)
Find related papers by JEL classification:
- E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
- N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
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- John P. Judd & Bharat Trehan, 1995. "Has the Fed gotten tougher on inflation?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue Mar 31.
- Athanasios O. Tagkalakis, 2013. "The output effects of systematic and non-systematic fiscal policy changes in Greece," Economics Bulletin, AccessEcon, vol. 33(3), pages 1816-1831.
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