Should Monetary Policy be Adjusted Frequently?
This paper considers the optimal frequency of central bank decision making. This frequency affects the central bank’s flexibility to respond to economic shocks in a timely fashion, and also its credibility to maintain low inflation. Generally, the central bank resets monetary policy less often than the arrival of economic news. By adjusting monetary policy less frequently, the central bank achieves lower inflation at the cost of somewhat higher output variability. Evidence for several key countries (Australia, Germany, Japan, the United Kingdom and the United States) shows that the frequency of actual monetary policy changes is indeed positively related to the inflation rate.
|Date of creation:||Feb 1999|
|Date of revision:|
|Contact details of provider:|| Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.|
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
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.:
- Eijffinger, S-C-W & de Haan, J, 1996.
"The Political Economy of Central-Bank Independence,"
Princeton Studies in International Economics
19, International Economics Section, Departement of Economics Princeton University,.
- Eijffinger, S. & De Hann, J., 1995. "The Political Economy of Central Bank Independence," Papers 9587, Tilburg - Center for Economic Research.
- Thomas F. Cargill & Michael M. Hutchison & Takatoshi Ito, 1997. "The Political Economy of Japanese Monetary Policy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262032473, March.
- Robert J. Barro & David B. Gordon, 1983.
"Rules, Discretion and Reputation in a Model of Monetary Policy,"
NBER Working Papers
1079, National Bureau of Economic Research, Inc.
- Barro, Robert J. & Gordon, David B., 1983. "Rules, discretion and reputation in a model of monetary policy," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 101-121.
- Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
- Boschen, John F & Mills, Leonard O, 1995. "The Relation between Narrative and Money Market Indicators of Monetary Policy," Economic Inquiry, Western Economic Association International, vol. 33(1), pages 24-44, January.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:2074. 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: ()The email address of this maintainer does not seem to be valid anymore. Please ask to update the entry or send us the correct email address
If references are entirely missing, you can add them using this form.