The Stabilizing Properties of a Nominal GNP Rule
AbstractThe author examines the ability of a nominal GNP rule for monetary policy to stabilize output and inflation. Other regimes considered are a money rule, an exchange rate rule, a price level rule, and discretion. The rules compare favorably to discretion to the extent that a time-consistent commitment to a nominal anchor is needed to eliminate an inflationary bias in the economy. The choice among the four rules depends on the relative magnitudes of the disturbances considered: supply shocks, velocity shocks, and exchange rate shocks. The nominal GNP rule dominates the exchange rate and other rules for plausible parameter values. Copyright 1995 by Ohio State University Press.
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Bibliographic InfoArticle provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.
Volume (Year): 27 (1995)
Issue (Month): 2 (May)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879
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