A comparison of equilibrium under alternative monetary policy rules

Ali K. Malik

Applied Economics Letters, 2012, vol. 19, issue 14, 1391-1399

Abstract: We evaluate the Taylor rule and the nominal income-targeting rule at alternative horizons, along the dimension of determinacy and E-stability of the rational expectations equilibrium. We use the New Keynesian model frequently used as a benchmark model for the evaluation of alternative monetary policy rules in the recent literature, for this purpose. Evaluating the two policy rules along this dimension, our results clearly prefer the Taylor rule over the nominal income-targeting rule.

Date: 2012
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DOI: 10.1080/13504851.2011.631880

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