Monetary Policy Rules Work and Discretion Doesn't: A Tale of Two Eras
This lecture examines monetary policy during the past three decades. It documents two contrasting eras: first a Rules-Based Era from 1985 to 2003 and second an Ad Hoc Era from 2003 to the present. During the Rules-Based Era, monetary policy, in broad terms, followed a predictable systemic approach, and economic performance was generally good. During the Ad Hoc Era monetary policy is best described as a “discretion of authorities” approach, and economic performance was decidedly poor. By considering alternative explanations of this policy-performance correlation and examining corroborating evidence, the paper concludes that rules based policies have clear advantages over discretion.
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Volume (Year): 44 (2012)
Issue (Month): 6 (09)
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References listed on IDEAS
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- Ahrend, Rudiger, 2010.
"Monetary ease: A factor behind financial crises? Some evidence from OECD countries,"
Economics - The Open-Access, Open-Assessment E-Journal,
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- Johannes C. Stroebel & John B. Taylor, 2009. "Estimated Impact of the Fed's Mortgage-Backed Securities Purchase Program," NBER Working Papers 15626, National Bureau of Economic Research, Inc.
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