Comparing Monetary Policy Strategies: Towards a Generalized Reaction Function

Felix Hammermann

No 1170, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: There seems to be no consensus in the literature with respect to monetary policy strategies in combination with flexible exchange rate regimes. Therefore, this paper determines what the alternative strategies inflation targeting, Taylor rule, monetary conditions index, and managed floating have in common. The fact that all strategies build on reaction functions which use the short-term interest rate as an important or even the single monetary policy instrument allows a generalized reaction function for all strategies to be derived. Future research may use such a generalized reaction function for describing and determining monetary policy in emerging market economies with flexible exchange rate regimes.

Keywords: Monetary Policy; Inflation Targeting; Taylor Rule; Monetary Conditions Index; Managed Floating (search for similar items in EconPapers)
JEL-codes: E42 E52 E58 (search for similar items in EconPapers)
Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1170

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