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The Macroeconomic Performance of Monetary Policies. A Stochastic Simulation Based on the Taylor’s Rule

  • Cristi SPULBĂR

    ()

    (University of Craiova, Romania)

  • Cristian STANCIU

    ()

    (University of Craiova, Romania)

  • Mihai NIŢOI

    ()

    (University of Craiova, Romania)

In this paper we try to check if and how the macroeconomic performances induced by a Taylor’s rule based kind of monetary policy are (or not) more efficient than those effectively induced by the most important central bank’s monetary policies. In this kind of respect, we use a simple three equations model: a Phillips equation, an aggregate demand equation and a fixing rule for the main interest rate. Based on historical simulation as well as on stochastic simulation, it turns out that macroeconomic performances, in terms of inflation and productivity gap, would be more stable and efficient if the Taylor’s rule would be used by a certain central bank in fixing its main interest rate.

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Article provided by ScientificPapers.org in its journal Journal of Knowledge Management, Economics and Information Technology.

Volume (Year): 1 (2011)
Issue (Month): 6 (October)
Pages: 15

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Handle: RePEc:spp:jkmeit:1190
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  1. Glenn D. Rudebusch & Lars E. O. Svensson, 1998. "Policy rules for inflation targeting," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
  2. Minford, Patrick & Ou, Zhirong, 2013. "Taylor Rule or optimal timeless policy? Reconsidering the Fed's behavior since 1982," Economic Modelling, Elsevier, vol. 32(C), pages 113-123.
  3. Svensson, Lars E. O., 1999. "Inflation targeting as a monetary policy rule," Journal of Monetary Economics, Elsevier, vol. 43(3), pages 607-654, June.
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