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Author:Schaling, Eric 

Working Paper
Monetary policy, determinacy, and learnability in a two-block world economy

We study how determinacy and learnability of worldwide rational expectations equilibrium may be affected by monetary policy in a simple, two country, New Keynesian framework under both fixed and flexible exchange rates. We find that open economy considerations may alter conditions for determinacy and learnability relative to closed economy analyses, and that new concerns can arise in the analysis of classic topics such as the desirability of exchange rate targeting and monetary policy cooperation.
Working Papers , Paper 2006-038

Journal Article
New economy-new policy rules

The U.S. economy appears to have experienced a pronounced shift toward higher productivity over the last five years or so. We wish to understand the implications of such shifts for the structure of optimal monetary policy rules in simple dynamic economies. Accordingly, we begin with a standard economy in which a version of the Taylor rule constitutes the optimal monetary policy for a given inflation target and a given level of productivity. We augment this model with regime switching in productivity and calculate the optimal monetary policy rule in the altered environment. We find that, in ...
Review , Volume 83 , Issue May , Pages 57-66

Journal Article
Why the Fed should ignore the stock market

James B. Bullard and Eric Schaling study a simple, small dynamic economy which a policymaker is attempting to control with a Taylor-type monetary policy rule. The authors wish to understand the macroeconomic consequences of the policymaker?s decision to include the level of equity prices in the rule. They show that such a policy can be counterproductive because it can interfere directly with the policymaker?s ability to minimize inflation and output variability. In extreme cases, a policy of targeting equity prices can lead to an indeterminate rational expectations equilibrium and hence a ...
Review , Volume 84 , Issue Mar. , Pages 35-42

Working Paper
New economy - new policy rules?

The U.S. economy appears to have experienced a pronounced shift toward higher productivity over the last five years or so. We wish to understand the implications of such shifts for the structure of optimal monetary policy rules in simple dynamic economies. Accordingly, we begin with a standard economy in which a version of the Taylor rule constitutes the optimal monetary policy for a given inflation target and a given level of productivity. We augment this model with regime switching in productivity, and calculate the optimal monetary policy rule in the altered environment. We find that in ...
Working Papers , Paper 2000-019

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