-
Estimates of the Effectiveness of Monetary Policy
- Journal of Money, Credit, and Banking
- The Ohio State University Press
- Volume 37, Number 4, August 2005
- pp. 645-660
- 10.1353/mcb.2005.0041
- Article
- Additional Information
This paper examines various interest rate rules, as well as policies derived by solving optimal control problems, for their ability to dampen economic fluctuations caused by random shocks. A tax rate rule is also considered. A multicountry econometric model is used for the experiments. The results differ sharply from those obtained using recent models in which the coeffi- cient on inflation in the nominal interest rate rule must be greater than one in order for the economy to be stable.