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Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory (2000)
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| Venue: | Journal of Economics |
| Citations: | 1262 - 16 self |
BibTeX
@ARTICLE{Clarida00monetarypolicy,
author = {Richard Clarida and Mark Gertler},
title = {Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory},
journal = {Journal of Economics},
year = {2000},
volume = {115},
pages = {147--180}
}
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Abstract
We estimate a forward-looking monetary policy reaction function for the postwar United States economy, before and after Volcker’s appointment as Fed Chairman in 1979. Our results point to substantial differences in the estimated rule across periods. In particular, interest rate policy in the Volcker-Greenspan period appears to have been much more sensitive to changes in expected in�ation than in the pre-Volcker period. We then compare some of the implications of the estimated rules for the equilibrium properties of in�ation and output, using a simple macroeconomic model, and show that the Volcker-Greenspan rule is stabilizing. I.
Keyphrases
monetary policy rule macroeconomic stability estimated rule forward-looking monetary policy reaction function volcker-greenspan period interest rate policy substantial difference fed chairman equilibrium property simple macroeconomic model volcker-greenspan rule pre-volcker period result point postwar united state economy
