The Macroeconomic Performance of Monetary Policies. A Stochastic Simulation Based on the Taylor’s Rule

Cristi Spulbar (), Cristian Stanciu () and Mihai Niţoi ()
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Cristian Stanciu: University of Craiova, Romania
Mihai Niţoi: University of Craiova, Romania

Journal of Knowledge Management, Economics and Information Technology, 2011, vol. 1, issue 6, 15

Abstract: In this paper we try to check if and how the macroeconomic performances induced by a Taylor’s rule based kind of monetary policy are (or not) more efficient than those effectively induced by the most important central bank’s monetary policies. In this kind of respect, we use a simple three equations model: a Phillips equation, an aggregate demand equation and a fixing rule for the main interest rate. Based on historical simulation as well as on stochastic simulation, it turns out that macroeconomic performances, in terms of inflation and productivity gap, would be more stable and efficient if the Taylor’s rule would be used by a certain central bank in fixing its main interest rate.

Keywords: Stochastic Simulation; Monetary Policy; Taylor’s Rule; Central Banks; Macroeconomic Performance (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:spp:jkmeit:1190

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