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Alternative Views of the Monetary Transmission Mechanism: What Difference Do They Make for Monetary Policy?

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  • Taylor, John B

Abstract

This paper examines how alternative views of the monetary transmission mechanism affect the choice of a monetary policy rule. The main finding is that many different structural models indicate that the same simple monetary policy rule--one in which the central bank's target short-term interest rate reacts to inflation and to real output--would perform well. Such rules work well even in models where the monetary transmission mechanism has a relatively strong exchange-rate channel. The models differ, however, in their implications for more complex monetary rules. Copyright 2000 by Oxford University Press.

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  • Taylor, John B, 2000. "Alternative Views of the Monetary Transmission Mechanism: What Difference Do They Make for Monetary Policy?," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 16(4), pages 60-73, Winter.
    • Handle: RePEc:oup:oxford:v:16:y:2000:i:4:p:60-73
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