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This timely volume presents the latest thinking on the monetary policy rules and seeks to determine just what types of rules and policy guidelines function best. A unique cooperative research effort that allowed contributors to evaluate different policy rules using their own specific approaches, this collection presents their striking findings on the potential response of interest rates to an array of variables, including alterations in the rates of inflation, unemployment, and exchange. Monetary Policy Rules illustrates that simple policy rules are more robust and more efficient than complex rules with multiple variables. A state-of-the-art appraisal of the fundamental issues facing the Federal Reserve Board and other central banks, Monetary Policy Rules is essential reading for economic analysts and policymakers alike.
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This Page Intentionally Left Blank Monetary Policy Rules A National Bureau of Economic Research Conference Report Studies in Business Cycles Volume 31 National Bureau of Economic Research Conference on Research in Business Cycles The University of Chicago Press, Chicago 60637 The University of Chicago Press, Ltd., London 0 1999 by the National Bureau of Economic Research All rights reserved. Published 1999 Paperback edition 2001 10 09 08 07 06 05 04 03 02 01 2 3 4 5 6 ISBN: 0-226-79124-6 (cloth) ISBN: 0-226-79125-4 (paperback) Library of Congress Cataloging-in-Publication Data Monetary policy rules / edited by John B. Taylor. P bk. ed. cm.-(Studies in Business cycles; v. 31) p. Papers based on the National Bureau of Economic Research Conference on Research in Business Cycles, held at Standford University, 1998. Includes bibliographical references and indexes. ISBN 0-226-79125-4 1. Monetary policy-Econometric models-Congresses. 2. Monetary policy-United States-Econometric modelsCongresses. I. Taylor, John B. 11. National Bureau of Economic Research Conference on Research in Business Cycles (1998 : Stanford University 111. Studies in business cycles ; no. 3 1. HG230.5.M66 2001 332.4’6-dc21 00-069072 CIP @The paper used in this publication meets the minimum requirements of the American National Standard for Information Sciences-Permanence of Paper for Printed Library Materials, ANSI 239.48-1992 National Bureau of Economic Research Officers John H. Biggs, chairman Carl F. Christ, vice-chairman Martin Feldstein, president and chief executive oflcer Robert Mednick. treasurer Sam Parker, chieffinancial oficer Susan Colligan, corporate secretary Kelly Horak, controller and assistant corporate secretary Gerardine Johnson, assistant corporate secretaly Directors at Large Peter C. Aldrich Elizabeth E. Bailey John H. Biggs Andrew Brimmer Carl F. Christ Don R. Conlan Kathleen B. Cooper George C. Eads Martin Feldstein Stephen Friedman George Hatsopoulos Karen N. Horn John Lipsky Leo Melamed Michael H. Moskow Rudolph A. Oswald Robert T. Parry Peter G. Peterson Richard N. Rosett Kathleen P. Utgoff Marina v.N. Whitman Directors by University Appointment George Akerlof, California, Berkeley Jagdish Bhagwati, Columbia William C. Brainard, Yule Glen G. Cain, Wisconsin Franklin Fisher, Massachusetts Institute of Technology Saul H. Hymans, Michigan Marjorie B. McElroy, Duke Joel Mokyr, Northwestern Andrew Postlewaite, Pennsylvania Nathan Rosenberg, Stanford Harold T. Shapiro, Princeton Craig Swan, Minnesota David B. Yoffie, Harvard Arnold Zellner, Chicago Directors by Appointment of Other Organizations Marcel Boyer, Canadian Economics Association Mark Drabenstott, American Agricultural Economics Association William C. Dunkelberg, National Association of Business Economists Gail D. Fosler, The Conference Board A. Ronald Gallant, American Statistical Association Robert S . Hamada,