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The Robustness and Efficiency of Monetary Policy Rules as Guidelines for Interest Rate Setting by the European Central Bank

  • Taylor, John B.

    ()

    (Stanford University, Department of Economics)

This paper examines the implications of recent research on monetary policy rules for practical monetary policy making, with special emphasis on strategies for setting interest rates by the new European Central Bank (ECB). The paper draws on recent research and new simulations of a large open economy model to assess the efficiency of a simple benchmark rule in comparison with other proposed rules. The paper stresses new results on the robustness of monetary policy rules in which each rule that is optimal or good according to one model or researcher is tested for robustness by other researchers using different models. Because of the large increase in the number of economists focussing on econometric evaluation of monetary policy rules for the interest rate instrument and because of the parallel increase in the variety of models being developed for this purpose, much more evidence is becoming available on the robustness of simle monetary policy rules for the interest rate than ever before.

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Paper provided by Stockholm University, Institute for International Economic Studies in its series Seminar Papers with number 649.

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Length: 39 pages
Date of creation: 01 Aug 1998
Date of revision:
Handle: RePEc:hhs:iiessp:0649
Contact details of provider: Postal:
Institute for International Economic Studies, Stockholm University, S-106 91 Stockholm, Sweden

Phone: +46-8-162000
Fax: +46-8-161443
Web page: http://www.iies.su.se/

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  10. Frankel, Jeffrey A. & Rose, Andrew K., 1997. "Economic Structure and the Decision to Adopt a Common Currency," Seminar Papers 611, Stockholm University, Institute for International Economic Studies.
  11. Hassler, John & Rodríguez Mora, José Vicente, 1998. "IQ, Social Mobility and Growth," CEPR Discussion Papers 1827, C.E.P.R. Discussion Papers.
  12. Anderson, James E., 1997. "Revenue Neutral Trade Reform with Many Households, Quotas and Tariffs," Seminar Papers 626, Stockholm University, Institute for International Economic Studies.
  13. Wieland, Volker, 1996. "Monetary policy targets and the stabilization objective: a source of tension in the EMS," Journal of International Money and Finance, Elsevier, vol. 15(1), pages 95-116, February.
  14. Bennett T. McCallum & Edward Nelson, 1999. "Performance of Operational Policy Rules in an Estimated Semiclassical Structural Model," NBER Chapters, in: Monetary Policy Rules, pages 15-56 National Bureau of Economic Research, Inc.
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  19. R. Barrell & R. Anderton & N. Vaughan & J.W. in't Veld, 1993. "The World Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 146(1), pages 30-49, November.
  20. Persson, M & Persson, T & Svensson, L-E-O, 1996. "Debt, Cash Flow and Inflation Incentives : A Swedish Example," Papers 613, Stockholm - International Economic Studies.
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  26. Svensson, Lars E.O., 1997. "Inflation Targeting: Some Extensions," Seminar Papers 625, Stockholm University, Institute for International Economic Studies.
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  41. repec:fip:fedgsq:y:1996:i:mar13 is not listed on IDEAS
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  44. Nicoletta Batini & Andrew G Haldane, 1999. "Forward-looking rules for monetary policy," Bank of England working papers 91, Bank of England.
  45. John B. Taylor, 1996. "How should monetary policy respond to shocks while maintaining long-run price stability? Conceptual issues," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 181-195.
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