TY  - JOUR
AU  - Clarida,Richard
AU  - Gali,Jordi
AU  - Gertler,Mark
TI  - Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6442
PY  - 1998
Y2  - March 1998
UR  - http://www.nber.org/papers/w6442
L1  - http://www.nber.org/papers/w6442.pdf
N1  - Author contact info:
Richard H. Clarida
Columbia University
420 West 118th Street
Room 1111, IAB
New York, NY  10027
Tel: 212/854-3676
Fax: 212/854-8059
E-Mail: rhc2@columbia.edu

Jordi Gali
Centre de Recerca en Economia Internacional (CREI)
Ramon Trias Fargas 25
08005 Barcelona
SPAIN
Tel: 011-34-93-5422754
Fax: 011-34-93-5421860
E-Mail: jgali@crei.cat

Mark Gertler
Department of Economics
New York University
269 Mercer Street, 7th Floor
New York, NY 10003
Tel: 212/998-8931
Fax: 212/995-4186
E-Mail: mark.gertler@nyu.edu
M2  - featured in NBER digest on 1998-10-01
AB  - 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.
ER  -