This paper reconsiders a result obtained by Sargent and Wallace, namely, that price level indeterminacy obtains in their well-known model if the monetary authorities adopt a policy feedback rule for the interest rate rather than the money stock. Since the Federal Reserve seems often to have used...

Svensson (JEL, 2003) argues strongly that specific targeting rules first order optimality conditions for a specific objective function and model are normatively superior to instrument rules for the conduct of monetary policy. That argument is based largely upon four main objections to the latter...

This paper addresses a prominent empirical failure of the expectations theory of the term structure of interest rates under the assumption of rational expectations. This failure concerns the magnitude of slope coefficients in regressions of short rate (or long- rate) changes on long-short...

Recent experience does not include a "monetarist experiment," as some have argued, but may slightly reinforce preexisting reasons for doubting that the best way of formulating monetarist policy prescriptions is in the form of a constant growth rule for the money stock.A more desirable rule would...

A Keynesian idea of considerable historical importance is that, in the presence of a liquidity trap, a competitive economy may lack--despite price flexibility--automatic market mechanisms that tend to eliminate excess supplies of labor. The standard classical counterargument, which relies upon...

Several recent papers have usefully emphasized the inefficiency that arises from discretionary monetary policymaking, relative to optimal policy from a 'timeless perspective,' in macroeconomic models with forward-looking private behavior. The inefficiency in question is in terms of average...

The purpose of this paper is to describe and evaluate the most important existing ideas concerning credibility of monetary policy, with special emphasis given to matters pertaining to the U.S. economy and the practices and procedures of the Fed. The main discussion begins with Fellner's...

This paper argues that, in studying the monetary policy transmission process, more emphasis should be given to the systematic portion of policy behavior and correspondingly less to random shocks basically because shocks account for a very small fraction of policy-instrument variability. Analysis...

To consider the prospects, looking 20-30 years into the future, for monetary policymaking in accordance with policy rules, one must evaluate their present importance. That requires some definition of what constitutes rule-based monetary policy in practice, since no actual central bank will ever...