TY  - JOUR
AU  - Fischer,Stanley
TI  - Rules Versus Discretion in Monetary Policy
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2518
PY  - 1988
Y2  - February 1988
UR  - http://www.nber.org/papers/w2518
L1  - http://www.nber.org/papers/w2518.pdf
N1  - Author contact info:
Stanley Fischer
Governor
Bank of Israel
One Kaplan Street
Jerusalem 91007
ISRAEL
Tel: 9722-655-2701
Fax: 9722-652-8419
E-Mail: sfischer@bankisrael.gov.il
AB  - This paper examines the case for rules rather than discretion in the conduct of monetary policy, from both historical and analytic perspectives. The paper starts with the rules of the game under the gold standard. These rules were ill-defined and not adhered to; active discretionary policy was pursued to defend the gold standard -- but the gold standard came closer to a regime of rules than the current system. The arguments for rules in general developed by Milton Friedman are described mo appraised; alternative rules including the constant money growth ratio rule, interest rate rules, nominal GNP targeting, and price level rules are analyzed. Until 1977 the general argument for monetary rules suffered from the apparent dominance of discretion: if a particular monetary policy was desirable, it could always 09 adopted by discretion. The introduction of the notion of dynamic inconsistency made a stronger case for rules, the final sections analyze tine case for rules rather than discretion in the light of recent game theoretic approaches to policy analysis.
ER  -