On Measuring the Efficiency of Monetary Policy
AbstractCecchetti et al. (2006) develop a method for allocating macroeconomic performance changes among the structure of the economy, variability of supply shocks and monetary policy. We propose a dual approach of their method by borrowing well-known tools from production theory, namely the Farrell measure and the Malmquist index. Following Färe et al (1994) we propose a decomposition of the efficiency of monetary policy. It is shown that the global efficiency changes can be rewritten as the product of the changes in macroeconomic performance, minimum quadratic loss, and efficiency frontier.
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Bibliographic InfoPaper provided by Centre for Research into Industry, Enterprise, Finance and the Firm in its series CRIEFF Discussion Papers with number 1101.
Date of creation: Jan 2011
Date of revision:
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More information through EDIRC
efficiency frontier; inflation variability; Farrell measure; Malmquist index.;
Other versions of this item:
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-08-09 (All new papers)
- NEP-CBA-2011-08-09 (Central Banking)
- NEP-EFF-2011-08-09 (Efficiency & Productivity)
- NEP-MAC-2011-08-09 (Macroeconomics)
- NEP-MON-2011-08-09 (Monetary Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Cornes,Richard, 1992. "Duality and Modern Economics," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521336017.
- Stephen G. Cecchetti & Alfonso Flores-Lagunes & Stefan Krause, 2004.
"Has Monetary Policy Become More Efficient? A Cross Country Analysis,"
NBER Working Papers
10973, National Bureau of Economic Research, Inc.
- Stephen G. Cecchetti & Alfonso Flores-Lagunes & Stefan Krause, 2006. "Has Monetary Policy become more Efficient? a Cross-Country Analysis," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 116(511), pages 408-433, 04.
- Caves, Douglas W & Christensen, Laurits R & Diewert, W Erwin, 1982. "Multilateral Comparisons of Output, Input, and Productivity Using Superlative Index Numbers," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 92(365), pages 73-86, March.
- Fare, Rolf & Shawna Grosskopf & Mary Norris & Zhongyang Zhang, 1994. "Productivity Growth, Technical Progress, and Efficiency Change in Industrialized Countries," American Economic Review, American Economic Association, American Economic Association, vol. 84(1), pages 66-83, March.
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