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The Monetary Policy Model

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  • William Poole

Abstract

Most monetary economists today conduct their analysis within some version of a rational expectations model. A well-defined equilibrium in such a model requires that the private sector understand policy goals and the policymakers' model of the economy. An austere version of the model, with no information asymmetries, is valid only to a first approximation but nevertheless provides core insights to short- and long-run monetary policy. In this model, effective policy requires clarity of policy goals and clarity of the policy model as to how the economy works. The central bank must enjoy sustained credibility in the markets. Communication should focus on policy fundamentals and the monetary authorities' understanding of the economy, both of which are enhanced by continued research by monetary policy experts.Business Economics (2006) 41, 7–10; doi:10.2145/20060401

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  • William Poole, 2006. "The Monetary Policy Model," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 41(4), pages 7-10, October.
    • Handle: RePEc:pal:buseco:v:41:y:2006:i:4:p:7-10
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    Cited by:

    1. Rubina Hassan, 2011. "The Reserve Equation and the Analytics of Pakistan’s Monetary Policy," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 16(1), pages 111-142, Jan-Jun.
    2. Rakesh Mohan, 2008. "Monetary policy transmission in India," BIS Papers chapters, in: Bank for International Settlements (ed.), Transmission mechanisms for monetary policy in emerging market economies, volume 35, pages 259-307, Bank for International Settlements.

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