The Robustness and Efficiency of Monetary Policy Rules as Guidelines for Interest Rate Setting by the European Central Bank

John Taylor

No 649, Seminar Papers from Stockholm University, Institute for International Economic Studies

Abstract: This paper examines the implications of recent research on monetary policy rules for practical monetary policy making, with special emphasis on strategies for setting interest rates by the new European Central Bank (ECB). The paper draws on recent research and new simulations of a large open economy model to assess the efficiency of a simple benchmark rule in comparison with other proposed rules. The paper stresses new results on the robustness of monetary policy rules in which each rule that is optimal or good according to one model or researcher is tested for robustness by other researchers using different models. Because of the large increase in the number of economists focussing on econometric evaluation of monetary policy rules for the interest rate instrument and because of the parallel increase in the variety of models being developed for this purpose, much more evidence is becoming available on the robustness of simle monetary policy rules for the interest rate than ever before.

Keywords: monetary policy rules; interest rate; efficiency; robustness; European Central Bank (search for similar items in EconPapers)
JEL-codes: E42 E52 (search for similar items in EconPapers)
Pages: 39 pages
Date: 1998-08-01
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Citations: View citations in EconPapers (59)

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http://su.diva-portal.org/smash/get/diva2:328030/FULLTEXT01 (application/pdf)

Related works:
Journal Article: The robustness and efficiency of monetary policy rules as guidelines for interest rate setting by the European central bank (1999)
Working Paper: The Robustness and Efficiency of Monetary Policy Rules as Guidelines for Interest Rate Setting by European Central Bank (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iiessp:0649

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