Most central banks conduct monetary policy by setting targets for overnight interest rates. During the 1990s, central banks have tended to move these interest rates in small steps without reversing direction quickly, a practice called interest rate smoothing. For example, the majority of Federal...

This paper describes an empirical framework for analyzing the monetary transmission mechanism through which changes in monetary policy affect real GDP and inflation. The framework reflects the work of a large number of empirical researchers who have built econometric models of the impacts of...

In this paper we examine the effectiveness in controlling long-run inflation of feedback rules for monetary policy that link changes in a short-term interest rate to an intermediate target for either nominal GDP or M2. We conclude that a rule aimed at controlling the growth rate of nominal GDP...