Journal Article

Optimal monetary policy design: rules versus discretion again

Abstract: Should monetary authorities rely primarily on rules or their own discretion in conducting monetary policy? The debate has recently been revived by researchers who claim that discretionary monetary policy tempts policy makers to exploit a short-run trade-off between output and inflation and thereby leads to higher inflation expectations. This article evaluates the arguments advanced in support of these views and tests them against the empirical evidence.

Keywords: Monetary policy; Inflation (Finance);

Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Quarterly Review

Publication Date: 1990

Volume: 15

Issue: Win

Pages: 65-79