NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory

Richard Clarida, Jordi Gali, Mark Gertler

NBER Working Paper No. 6442
Issued in March 1998
NBER Program(s):   EFG   ME

We estimate a forward-looking monetary policy reaction function for the postwar US economy, pre- and post-October 1979. Our results point to substantial differences in the estimated rule across periods. In particular, interest rate policy in the Volcker-Greenspan period appears to have been much more sensitive to changes in expected inflation than in the pre-Volcker period. We then compare some of the implications of the estimated rules for equilibrium properties of inflation and output, using a simple macroeconomic model. The pre-Volcker rule is shown to be consistent with the possibility of persistent, self-fulfilling fluctuations in inflation and output. In contrast, the Volcker-Greenspan rule is stabilizing.

download in pdf format
   (1228 K)

email paper

A non-technical summary of this paper is available in the October 1998 NBER digest.  You can sign up to receive the NBER Digest by email.

This paper is available as PDF (1228 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w6442

Published: Quarterly Journal of Economics, Vol. CXV, issue 1 (2000): 147-180. citation courtesy of

Users who downloaded this paper also downloaded these:
Kashyap and Stein Monetary Policy and Bank Lending
Taylor A Historical Analysis of Monetary Policy Rules
Clarida, Gali, and Gertler w7147 The Science of Monetary Policy: A New Keynesian Perspective
Clarida w8603 The Empirics of Monetary Policy Rules in Open Economies
Gali and Gertler w7551 Inflation Dynamics: A Structural Econometric Analysis
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us