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Interest Rate Rules vs. Money Growth Rules: Some Theoretical Issues and an Empirical Application for Venezuela

  • Víctor Olivo

    (Banco Central de Venezuela)

This paper main theme is that the arguments against the use of money (i.e. money growth rate rules) in the conduct of monetary policy are not so strong, particularly for less developed economies. I analyze this topic in two ways: i) using some simple theoretical forward-looking macro models and evaluating their inflation and output variance under interest rate and monetary aggregates rules; ii) setting up models similar to the theoretical ones, but with more complex dynamics, assigning values to the parameters, and solving them for different kind of shocks under interest rate and monetary aggregates rules.

(This abstract was borrowed from another version of this item.)

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File URL: http://www.cemla.org/PDF/moneyaffairs/PUB_MONAFF_XVIII01.pdf
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Article provided by Centro de Estudios Monetarios Latinoamericanos in its journal Money Affairs.

Volume (Year): XVIII (2005)
Issue (Month): 1 (January-June)
Pages: 57-82

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Handle: RePEc:cml:moneya:v:xviii:y:2005:i:1:p:57-82
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  1. Nelson, Edward, 2001. "Direct Effects of Base Money on Aggregate Demand: Theory and Evidence," CEPR Discussion Papers 2666, C.E.P.R. Discussion Papers.
  2. Laurence Ball, 1997. "Efficient rules for monetary policy," Reserve Bank of New Zealand Discussion Paper Series G97/3, Reserve Bank of New Zealand.
  3. Niamh Sheridan & Laurence M. Ball, 2003. "Does Inflation Targeting Matter?," IMF Working Papers 03/129, International Monetary Fund.
  4. McCallum, Bennett T & Nelson, Edward, 1999. "An Optimizing IS-LM Specification for Monetary Policy and Business Cycle Analysis," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(3), pages 296-316, August.
  5. Kevin J. Lansing & Bharat Trehan, 2003. "Forward-looking behavior and optimal discretionary monetary policy," Working Paper Series 2001-03, Federal Reserve Bank of San Francisco.
  6. Carl E. Walsh, 2003. "Monetary Theory and Policy, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232316.
  7. Bennett T. McCallum, 1999. "Recent developments in the analysis of monetary policy rules," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 3-12.
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