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On Measuring the Efficiency of Monetary Policy

Author

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  • Briec, Walter
  • Gabillon, Emmanuelle
  • Lasselle, Laurence

Abstract

Cecchetti et al. (2006) develop a method for allocating macroeconomic performance changes among the structure of the economy, variability of supply shocks and monetary policy. We propose a dual approach of their method by borrowing well-known tools from production theory, namely the Farrell measure and the Malmquist index. Following Fare et al (1994) we propose a decomposition of the efficiency of monetary policy. It is shown that the global efficiency changes can be rewritten as the product of the changes in macroeconomic performance, minimum quadratic loss, and efficiency frontier.

Suggested Citation

  • Briec, Walter & Gabillon, Emmanuelle & Lasselle, Laurence, 2011. "On Measuring the Efficiency of Monetary Policy," SIRE Discussion Papers 2011-09, Scottish Institute for Research in Economics (SIRE).
  • Handle: RePEc:edn:sirdps:251
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    File URL: http://hdl.handle.net/10943/251
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    References listed on IDEAS

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    1. Stephen G. Cecchetti & Alfonso Flores-Lagunes & Stefan Krause, 2006. "Has Monetary Policy become more Efficient? a Cross-Country Analysis," Economic Journal, Royal Economic Society, vol. 116(511), pages 408-433, April.
    2. Caves, Douglas W & Christensen, Laurits R & Diewert, W Erwin, 1982. "Multilateral Comparisons of Output, Input, and Productivity Using Superlative Index Numbers," Economic Journal, Royal Economic Society, vol. 92(365), pages 73-86, March.
    3. Cornes,Richard, 1992. "Duality and Modern Economics," Cambridge Books, Cambridge University Press, number 9780521336017, May.
    4. Fare, Rolf & Shawna Grosskopf & Mary Norris & Zhongyang Zhang, 1994. "Productivity Growth, Technical Progress, and Efficiency Change in Industrialized Countries," American Economic Review, American Economic Association, vol. 84(1), pages 66-83, March.
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    Cited by:

    1. Etienne Farvaque & Piotr Stanek & St├ęphane Vigeant, 2014. "On the Performance of Monetary Policy Committees," Kyklos, Wiley Blackwell, vol. 67(2), pages 177-203, May.

    More about this item

    Keywords

    effciency frontier; inflation variability; Farrell measure; Malmquist index;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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