Money Growth Monitoring and the Taylor Rule

Lawrence Christiano () and Massimo Rostagno ()

No 8539, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Using a series of examples, we review the various ways in which a monetary policy characterized by the Taylor rule can inject volatility into the economy. In the examples, a particular modification to the Taylor rule can reduce or even entirely eliminate the problems. Under the modified policy, the central bank monitors the money growth rate and commits to abandoning the Taylor rule in favor of a money growth rule in case money growth passes outside a particular monitoring range.

JEL-codes: E52 E31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba and nep-mon
Date: 2001-10
Note: EFG ME
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