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Interest rate rules VS money growth rules: some theoretical issues and an empirical application for Venezuela

This paper main theme is that the arguments against the use of money (i.e. money growth rate rules) in the conduct of monetary policy are not so strong, particularly for less developed economies. I analyze this topic in two ways: i) using some simple theoretical forward-looking macro models and evaluating their inflation and output variance under interest rate and monetary aggregates rules; ii) setting up models similar to the theoretical ones, but with more complex dynamics, assigning values to the parameters, and solving them for different kind of shocks under interest rate and monetary aggregates rules.

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File URL: https://mpra.ub.uni-muenchen.de/41253/1/MPRA_paper_41253.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 41253.

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Date of creation: Feb 2005
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Handle: RePEc:pra:mprapa:41253
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  1. Laurence M. Ball & Niamh Sheridan, 2004. "Does Inflation Targeting Matter?," NBER Chapters, in: The Inflation-Targeting Debate, pages 249-282 National Bureau of Economic Research, Inc.
  2. Edward Nelson, 2000. "Direct effects of base money on aggregate demand: theory and evidence," Bank of England working papers 122, Bank of England.
  3. Bennett T. McCallum & Edward Nelson, 1997. "An Optimizing IS-LM Specification for Monetary Policy and Business Cycle Analysis," NBER Working Papers 5875, National Bureau of Economic Research, Inc.
  4. Kevin J. Lansing & Bharat Trehan, 2003. "Forward-looking behavior and optimal discretionary monetary policy," Working Paper Series 2001-03, Federal Reserve Bank of San Francisco.
  5. Laurence Ball, 1997. "Efficient rules for monetary policy," Reserve Bank of New Zealand Discussion Paper Series G97/3, Reserve Bank of New Zealand.
  6. Carl E. Walsh, 2003. "Monetary Theory and Policy, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232316, December.
  7. Bennett T. McCallum, 1999. "Recent developments in the analysis of monetary policy rules," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 3-12.
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