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On Measuring the Efficiency of Monetary Policy

Walter Briec, Emmanuelle Gabillon () and Laurence Lasselle ()

No 2011-09, SIRE Discussion Papers from Scottish Institute for Research in Economics (SIRE)

Abstract: Cecchetti et al. (2006) develop a method for allocating macroeconomic performance changes among the structure of the economy, variability of supply shocks and monetary policy. We propose a dual approach of their method by borrowing well-known tools from production theory, namely the Farrell measure and the Malmquist index. Following Fare et al (1994) we propose a decomposition of the efficiency of monetary policy. It is shown that the global efficiency changes can be rewritten as the product of the changes in macroeconomic performance, minimum quadratic loss, and efficiency frontier.

Keywords: effciency frontier; inflation variability; Farrell measure; Malmquist index (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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