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Simulating the Effects of Some Simple Coordinated versus Uncoordinated Policy Rules

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  • International Monetary Fund

Abstract

Effects of different policy rules are simulated: uncoordinated targeting of the money supply or nominal income, use of monetary policy to achieve coordinated targets for nominal or real exchange rates, and the use of monetary and fiscal policies to hit targets for internal and external balance. The following conclusions emerge: rules which performed best for some shocks performed poorly for others; monetary policy was ineffective in limiting movements in real exchange rates; unconstrained use of fiscal policy was quite powerful in influencing real variables; and dynamic instability was a potentially serious problem. Robustness to different specifications and to constraints on instruments remains to be examined.

Suggested Citation

  • International Monetary Fund, 1989. "Simulating the Effects of Some Simple Coordinated versus Uncoordinated Policy Rules," IMF Working Papers 1989/017, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1989/017
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    Citations

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    Cited by:

    1. 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.
    2. Joseph E. Gagnon & Ralph W. Tryon, 1992. "Stochastic behavior of the world economy under alternative policy regimes," International Finance Discussion Papers 428, Board of Governors of the Federal Reserve System (U.S.).
    3. Anthonie Knoester & André Kolodziejak, 1994. "The need for economic policy coordination between Europe, Japan, and the United States: Policy recommendations for the 1990s," Open Economies Review, Springer, vol. 5(4), pages 327-346, October.
    4. Eric M. Leeper, 1990. "The dynamics of interest rate and tax rules in a stochastic model," International Finance Discussion Papers 375, Board of Governors of the Federal Reserve System (U.S.).

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