Performance of Operational Policy Rules in an Estimated Semi-Classical Structural Model

Bennett McCallum and Edward Nelson

No 6599, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper reports results of simulation exercises that explore several questions relating to the design of rules for monetary policy. Emphasis is given to issues raised by the concept of rule operationality, i.e., reliance on feasible instrument variables and information sets. Many of the results pertain to rules of the Taylor type -- i.e., with an interest rate instrument set in response to inflation and output-gap measures -- but some are reported for rules using a nominal income target and/or a monetary base instrument. The macroeconomic model utilized is small in scale but features a specification designed to represent rational dynamic optimizing choices by the economy's private agents. Saving and portfolio-balance behavior are expressed by optimizing versions of exceptional IS and LM functions, with gradual price adjustments specified differently in two variants of the model. One variant uses the well-known Calvo-Rotemberg price adjustment relation, whereas the second employs a newly-rationalized version of the Mussa-McCallum-Barro-Grossman P-bar model. Parameter values are estimated by instrumental variables on U.S. quarterly data for 1995-1996.

JEL-codes: E37 E42 (search for similar items in EconPapers)
Date: 1998-06
Note: EFG ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (146)

Published as Proceedings, Federal Reserve Bank of San Francisco, March 1998
Published as Performance of Operational Policy Rules in an Estimated Semiclassical Structural Model , Bennett T. McCallum, Edward Nelson. in Monetary Policy Rules , Taylor. 1999

Downloads: (external link)
http://www.nber.org/papers/w6599.pdf (application/pdf)

Related works:
Chapter: Performance of Operational Policy Rules in an Estimated Semiclassical Structural Model (1999)
Journal Article: Performance of operational policy rules in an estimated semi-classical structural model (1998)
Working Paper: Performance of Operational Policy Rules in an Estimated Semi-Classical Structural Model
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:6599

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w6599

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().