TY - JOUR
T1 - Monetary policy rules and macroeconomic stability
T2 - Evidence and some theory
AU - Clarida, Richard
AU - Galí, Jordi
AU - Gertler, Mark
N1 - Funding Information:
* We thank seminar participants at Universitat Pompeu Fabra, New York University, the Board of Governors of the Federal Reserve System, University of Maryland, NBER Summer Institute, Université de Toulouse, Bank of Spain, Harvard University, Bank of Mexico, Universitat de Girona, and the Federal Reserve Banks of Atlanta, New York, Richmond, Dallas, and Philadelphia, as well as two anonymous referees and two editors for useful comments. We thank Jean Boivin and Mark Watson for pointing out an error in a previous version of the manuscript. Tommaso Monacelli provided valuable research assistance. The second and third authors are grateful to the C. V. Starr Center (Galíand Gertler) and CREI (Galí) for financial support.
PY - 2000/2
Y1 - 2000/2
N2 - 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 inflation than in the pre-Volcker period. We then compare some of the implications of the estimated rules for the equilibrium properties of inflation and output, using a simple macroeconomic model, and show that the Volcker-Greenspan rule is stabilizing.
AB - 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 inflation than in the pre-Volcker period. We then compare some of the implications of the estimated rules for the equilibrium properties of inflation and output, using a simple macroeconomic model, and show that the Volcker-Greenspan rule is stabilizing.
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U2 - 10.1162/003355300554692
DO - 10.1162/003355300554692
M3 - Article
AN - SCOPUS:0006260747
SN - 0033-5533
VL - 115
SP - 147
EP - 180
JO - Quarterly Journal of Economics
JF - Quarterly Journal of Economics
IS - 1
ER -