This paper focuses on simple normative rules for monetary policy that central banks can use to guide their interest rate decisions. Such rules were first derived from research on empirical monetary models with rational expectations and sticky prices built in the 1970s and 1980s. During the past...

What is a good monetary policy rule for stabilizing the economy? In this paper, efficient policy rules are computed using the FRB/US large-scale open-economy macroeconometric model. Simple three-parameter policy rules are found to be very effective at minimizing fluctuations in inflation,...

We develop an estimated model of the U.S. economy in which agents form expectations by continually updating their beliefs regarding the behavior of the economy and monetary policy. We explore the effects of policymakers' misperceptions of the natural rate of unemployment during the late 1960s...

We examine the performance and robustness properties of monetary policy rules in an estimated macroeconomic model in which the economy undergoes structural change and where private agents and the central bank possess imperfect knowledge about the true structure of the economy. Policymakers...