The case for rules in the conduct of monetary policy: a concrete example
A policy rule can be activist; the distinction between rules and discretion depends on the stage at which optimization calculations enter the policy process. Here a specific monetary rule is proposed, one that sets the monetary base each quarter in a manner designed to keep nominal aggregate demand growing smoothly at a noninflationary rate. Simulations with a simple estimated model suggest that the proposed rule would have performed well over the period 1954-85, despite financial innovations and regulatory change.
Volume (Year): (1987)
Issue (Month): Sep ()
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- J.-P. Fitoussi & E. S. Phelps, 1986.
"Causes of the 1980s Slump in Europe,"
Brookings Papers on Economic Activity,
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NBER Working Papers
0807, National Bureau of Economic Research, Inc.
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