IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

New economy-new policy rules

  • James B. Bullard
  • Eric Schaling

The U.S. economy appears to have experienced a pronounced shift toward higher productivity over the last five years or so. We wish to understand the implications of such shifts for the structure of optimal monetary policy rules in simple dynamic economies. Accordingly, we begin with a standard economy in which a version of the Taylor rule constitutes the optimal monetary policy for a given inflation target and a given level of productivity. We augment this model with regime switching in productivity and calculate the optimal monetary policy rule in the altered environment. We find that, in the altered environment, a rule that incorporates leading indicators about regimes significantly outperforms the Taylor rule. We use this result to comment on the “new economy” events of the 1990s and the “stagflation” events of the 1970s from the perspective of our model.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://research.stlouisfed.org/publications/review/01/09/0109jb.pdf
Download Restriction: no

Article provided by Federal Reserve Bank of St. Louis in its journal Review.

Volume (Year): (2001)
Issue (Month): May ()
Pages: 57-66

as
in new window

Handle: RePEc:fip:fedlrv:y:2001:i:may:p:57-66:n:v.83no.5
Contact details of provider: Postal: P.O. Box 442, St. Louis, MO 63166
Fax: (314)444-8753
Web page: http://www.stlouisfed.org/

More information through EDIRC

Order Information: Web: http://www.stls.frb.org/research/order/pubform.html Email:


References listed on IDEAS
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.:

as in new window
  1. Svensson, L-E-O, 1996. "Inflation Forecast Targeting : Implementaing and Monitoring Inflation Targets," Papers 615, Stockholm - International Economic Studies.
  2. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
  3. Mark Gertler & Jordi Gali & Richard Clarida, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1661-1707, December.
  4. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:fip:fedlrv:y:2001:i:may:p:57-66:n:v.83no.5. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anna Xiao)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.