The case for rules in the conduct of monetary policy: a concrete example

Bennett McCallum

Economic Review, 1987, vol. 73, issue Sep, 10-18

Abstract: A policy rule can be activist; the distinction between rules and discretion depends on the stage at which optimization calculations enter the policy process. Here a specific monetary rule is proposed, one that sets the monetary base each quarter in a manner designed to keep nominal aggregate demand growing smoothly at a noninflationary rate. Simulations with a simple estimated model suggest that the proposed rule would have performed well over the period 1954-85, despite financial innovations and regulatory change.

Keywords: Monetary policy; Inflation (Finance); Monetary theory (search for similar items in EconPapers)
Date: 1987
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Citations: View citations in EconPapers (76)

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