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Abstract

Monetary policy regime combinations are compared for symmetric and asym­metric temporary shocks to money demand, goods demand, and productivity. In every region, the interest-rate instrument is either kept constant or changed to eliminate (full instrument adjustment) or reduce (partial instrument adjustment) the gap between actual and desired values for an intermediate target: the money supply, nominal income, or output plus inflation. Nominal wage persistence may be absent (Contract hypothesis) or present (Phillips hypothesis and Taylor hypothesis). There are analytical and simulation results from a two-region workhorse model and simulation results from the McKibbin-Sachs Global model. The ranking of regime combinations depends not only on the ultimate target and the source of shocks but also on the degrees of instrument adjustment and wage persistence.

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Bibliographic Info

Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 458.

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Date of creation: 1993
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Handle: RePEc:fip:fedgif:458

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Keywords: Econometrics ; Monetary policy;

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   • Henderson, Dale W. & McKibbin, Warwick J., 1993. "A comparison of some basic monetary policy regimes for open economies: implications of different degrees of instrument adjustment and wage persistence," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 221-317, December.
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11. Matthew B. Canzoneri & Dale W. Henderson, 1991. "Monetary Policy in Interdependent Economies: A Game-Theoretic Approach," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262031787.
12. Victor E. Argy, 1991. "Nominal Income Targeting - A Critical Evaluation," IMF Working Papers 91/92, International Monetary Fund.
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    • Meade, James E, 1993. "The Meaning of "Internal Balance."," American Economic Review, American Economic Association, vol. 83(6), pages 3-9, December.
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15. Barro,Robert J. & Grossman,Herschel I., 2008. "Money Employment and Inflation," Cambridge Books, Cambridge University Press, number 9780521068659.
16. Parkin, Michael, 1978. "A Comparison of Alternative Techniques of Monetary Control under Rational Expectations," The Manchester School of Economic & Social Studies, University of Manchester, vol. 46(3), pages 252-87, September.
17. Jacob A. Frenkel & Morris Goldstein & Paul R. Masson, 1989. "Simulating the Effects of Some Simple Coordinated versus Uncoordinated Policy," NBER Working Papers 2929, National Bureau of Economic Research, Inc.
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