Targeting rules vs. instrument rules for monetary policy
Subtitle: what is wrong with McCallum and Nelson?
By: Lars E.O. Svensson.
Contributors: National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 10747; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 10747.
Publisher: National Bureau of Economic Research
Published: 2004
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Monetary policy -- Mathematical models.
Description: "McCallum and Nelson's (2004) criticism of targeting rules for the analysis of monetary policy is rebutted.  First, McCallum and Nelson's preference to study the robustness of simple monetary-policy rules is no reason at all to limit attention to simple instrument rules; simple targeting rules may have more desirable properties.  Second, optimal targeting rules are a compact, robust, and structural description of goal-directed monetary policy, analogous to the compact, robust, and structural consumption Euler conditions in the theory of consumption.  They express the very robust condition of equality of the marginal rates of substitution and transformation between the central bank's target variables.  Third, under realistic information assumptions, the instrument-rule analogue to any targeting rule that McCallum and Nelson have proposed results in very large instrument-rate volatility and is also for other reasons inferior to a targeting rule"--National Bureau of Economic Research web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 1/12/2005.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.