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

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  • Victor, Olivo

Abstract

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.

Suggested Citation

  • Victor, Olivo, 2005. "Interest rate rules VS money growth rules: some theoretical issues and an empirical application for Venezuela," MPRA Paper 41253, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:41253
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    References listed on IDEAS

    as
    1. Bennett T. McCallum, 1999. "Recent developments in the analysis of monetary policy rules," Review, Federal Reserve Bank of St. Louis, vol. 81(Nov), pages 3-12.
    2. Laurence M. Ball & Niamh Sheridan, 2004. "Does Inflation Targeting Matter?," NBER Chapters, in: The Inflation-Targeting Debate, pages 249-276, National Bureau of Economic Research, Inc.
    3. Lansing, Kevin J. & Trehan, Bharat, 2003. "Forward-looking behavior and optimal discretionary monetary policy," Economics Letters, Elsevier, vol. 81(2), pages 249-256, November.
    4. Carl E. Walsh, 2003. "Monetary Theory and Policy, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232316, December.
    5. Laurence Ball, 1999. "Efficient Rules for Monetary Policy," International Finance, Wiley Blackwell, vol. 2(1), pages 63-83, April.
    6. Manfred J. M. Neumann & Jurgen Von Hagen, 2002. "Does inflation targeting matter?," Review, Federal Reserve Bank of St. Louis, vol. 84(Jul), pages 127-148.
    7. McCallum, Bennett T & Nelson, Edward, 1999. "An Optimizing IS-LM Specification for Monetary Policy and Business Cycle Analysis," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(3), pages 296-316, August.
    8. Nelson, Edward, 2002. "Direct effects of base money on aggregate demand: theory and evidence," Journal of Monetary Economics, Elsevier, vol. 49(4), pages 687-708, May.
    9. Víctor Tiberio Olivo, 2003. "Taylor Rules and Inflation Targeting do not Work with Systematic Foreign Exchange Market Intervention," Money Affairs, CEMLA, vol. 0(1), pages 51-67, January-J.
    10. Allan H. Meltzer, 2001. "The Transmission Process," Palgrave Macmillan Books, in: Deutsche Bundesbank (ed.), The Monetary Transmission Process, chapter 3, pages 112-130, Palgrave Macmillan.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Victor, Olivo, 2007. "El Régimen de Metas de Inflación en Brasil: Breve Descripción y Evaluación de su Desempeño [Brazil's Inflation Targeting Regime: Brief Description and Evaluation of its Performance]," MPRA Paper 41405, University Library of Munich, Germany.

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    More about this item

    Keywords

    Interest Rate Rules; Money Growth; Monetary Police; Rate Rules;
    All these keywords.

    JEL classification:

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

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