IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/2518.html
   My bibliography  Save this paper

Rules Versus Discretion in Monetary Policy

Author

Listed:
  • Stanley Fischer

Abstract

This paper examines the case for rules rather than discretion in the conduct of monetary policy, from both historical and analytic perspectives. The paper starts with the rules of the game under the gold standard. These rules were ill-defined and not adhered to; active discretionary policy was pursued to defend the gold standard -- but the gold standard came closer to a regime of rules than the current system. The arguments for rules in general developed by Milton Friedman are described mo appraised; alternative rules including the constant money growth ratio rule, interest rate rules, nominal GNP targeting, and price level rules are analyzed. Until 1977 the general argument for monetary rules suffered from the apparent dominance of discretion: if a particular monetary policy was desirable, it could always 09 adopted by discretion. The introduction of the notion of dynamic inconsistency made a stronger case for rules, the final sections analyze tine case for rules rather than discretion in the light of recent game theoretic approaches to policy analysis.

Suggested Citation

  • Stanley Fischer, 1988. "Rules Versus Discretion in Monetary Policy," NBER Working Papers 2518, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:2518 Note: EFG ME
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w2518.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-987, December.
    2. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    3. Kimball, Miles S & Mankiw, N Gregory, 1989. "Precautionary Saving and the Timing of Taxes," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 863-879, August.
    4. R. Glenn Hubbard & Kenneth L. Judd, 1985. "Social Security and Individual Welfare: Precautionary Saving, LiquidityConstraints, and the Payroll Tax," NBER Working Papers 1736, National Bureau of Economic Research, Inc.
    5. Barsky, Robert B & Mankiw, N Gregory & Zeldes, Stephen P, 1986. "Ricardian Consumers with Keynesian Propensities," American Economic Review, American Economic Association, vol. 76(4), pages 676-691, September.
    6. Davies, James B, 1981. "Uncertain Lifetime, Consumption, and Dissaving in Retirement," Journal of Political Economy, University of Chicago Press, vol. 89(3), pages 561-577, June.
    7. Riley, John G & Samuelson, William F, 1981. "Optimal Auctions," American Economic Review, American Economic Association, pages 381-392.
    8. Gordon, Roger H. & Varian, Hal R., 1988. "Intergenerational risk sharing," Journal of Public Economics, Elsevier, pages 185-202.
    9. Andrew Abel, "undated". "Aggregate Savings in the Presence of Private and Social Insurance," Rodney L. White Center for Financial Research Working Papers 23-86, Wharton School Rodney L. White Center for Financial Research.
    10. Kotlikoff, Laurence J & Spivak, Avia, 1981. "The Family as an Incomplete Annuities Market," Journal of Political Economy, University of Chicago Press, vol. 89(2), pages 372-391, April.
    11. Abel, Andrew B, 1986. "Capital Accumulation and Uncertain Lifetimes with Adverse Selection," Econometrica, Econometric Society, vol. 54(5), pages 1079-1097, September.
    12. Kotlikoff, Laurence J & Summers, Lawrence H, 1981. "The Role of Intergenerational Transfers in Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 706-732, August.
    13. Karni, Edi & Zilcha, Itzhak, 1986. "Welfare and comparative statics implications of fair social security : A steady-state analysis," Journal of Public Economics, Elsevier, pages 341-357.
    14. Chan, Louis Kuo Chi, 1983. "Uncertainty and the neutrality of government financing policy," Journal of Monetary Economics, Elsevier, vol. 11(3), pages 351-372.
    15. Eytan Sheshinski & Yoram Weiss, 1981. "Uncertainty and Optimal Social Security Systems," The Quarterly Journal of Economics, Oxford University Press, vol. 96(2), pages 189-206.
    16. Gordon, Roger H. & Varian, Hal R., 1988. "Intergenerational risk sharing," Journal of Public Economics, Elsevier, pages 185-202.
    17. Zvi Eckstein & Martin S. Eichenbaum & Dan Peled, 1985. "The Distribution of Wealth and Welfare in the Presence of Incomplete Annuity Markets," The Quarterly Journal of Economics, Oxford University Press, vol. 100(3), pages 789-806.
    18. Abel, Andrew B, 1985. "Precautionary Saving and Accidental Bequests," American Economic Review, American Economic Association, vol. 75(4), pages 777-791, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Adrian Chadi & Matthias Krapf, 2017. "The Protestant Fiscal Ethic: Religious Confession And Euro Skepticism In Germany," Economic Inquiry, Western Economic Association International, vol. 55(4), pages 1813-1832, October.
    2. Robert Flood & Peter Isard, 1989. "Simple Rules, Discretion and Monetary Policy," NBER Working Papers 2934, National Bureau of Economic Research, Inc.
    3. Francisco Rosende, 1997. "La Autonomía del Banco Central una Vez Más," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 34(101), pages 3-26.
    4. Lakomski-Laguerre, Odile & Desmedt, Ludovic, 2015. "L’alternative monétaire Bitcoin : une perspective institutionnaliste," Revue de la Régulation - Capitalisme, institutions, pouvoirs, Association Recherche et Régulation, vol. 18.
    5. Robert Rennhack, 1991. "La Conducción de la Política Monetaria," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 28(83), pages 11-20.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:2518. 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: (). General contact details of provider: http://edirc.repec.org/data/nberrus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.