Efficient Rules for Monetary Policy
Laurence Ball ()
International Finance, 1999, vol. 2, issue 1, 63-83
This paper defines an efficient rule for monetary policy as one that minimizes a weighted sum of output variance and inflation variance. It derives several results about the efficiency of alternative rules in a simple macroeconomic model. First, efficient rules can be expressed as "Taylor rules" in which interest rates respond to output and inflation. But the coefficients in efficient Taylor rules differ from the coefficients that fit actual policy in the United States. Second, inflation targets are efficient. Indeed, the set of efficient rules is equivalent to the set of inflation-target policies with different speeds of adjustment. Finally, nominal-income targets are highly inefficient: they create great volatility in both inflation and output. Copyright 1999 by Blackwell Publishers Ltd.
References: Add references at CitEc
Citations: View citations in EconPapers (156) Track citations by RSS feed
Downloads: (external link)
http://www.blackwell-synergy.com/servlet/useragent ... &year=1999&part=null link to full text (text/html)
Access to full text is restricted to subscribers.
Working Paper: Efficient Rules for Monetary Policy (1997)
Working Paper: Efficient rules for monetary policy (1997)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bla:intfin:v:2:y:1999:i:1:p:63-83
Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1367-0271
Access Statistics for this article
International Finance is currently edited by Benn Steil
More articles in International Finance from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().