The case for rules in the conduct of monetary policy: a concrete example
Bennett McCallum ()
Economic Review, 1987, issue sep, 10-18
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 theory; Inflation (Finance); Monetary policy (search for similar items in EconPapers)
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