@techreport{NBERw6442,
 title = "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory",
 author = "Richard Clarida and Jordi Gali and Mark Gertler",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "6442",
 year = "1998",
 month = "March",
 URL = "http://www.nber.org/papers/w6442",
 abstract = {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.},
}