The Explanatory Power of Monetary Policy Rules
AbstractThis paper shows that the theory of monetary policy rules is able to explain, predict, and help understand a variety of phenomenon in macroeconomics and finance, including the Great Moderation, the correlation between exchange rates and interest rates, and the shift in the response of the term structure of interest rates to inflation and output. Although the theory was originally designed for normative reasons, it has turned out to have positive implications which validate it scientifically. And while initially focused on the United States, it has applied equally well in other countries.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13685.
Date of creation: Dec 2007
Date of revision:
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Other versions of this item:
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-01-05 (All new papers)
- NEP-CBA-2008-01-05 (Central Banking)
- NEP-MAC-2008-01-05 (Macroeconomics)
- NEP-MON-2008-01-05 (Monetary Economics)
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