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INTEREST AND PRICES: FOUNDATIONS OF A THEORY OF MONETARY POLICY
With the collapse of the Bretton Woods system, any pretense of a connection of the world's currencies to any real commodity has been abandoned. Yet since the 1980s, most central banks have abandoned
An Optimization-Based Econometric Framework for the Evaluation of Monetary Policy
This paper considers a simple quantitative model of output, interest rate and inflation determination in the United States, and uses it to evaluate alternative rules by which the Fed may set interest
The Zero Bound on Interest Rates and Optimal Monetary Policy
This paper considers the consequences for monetary policy of the zero floor for nominal interest rates. The zero bound can be a significant constraint on the ability of a central bank to combat
Optimal Monetary Policy Inertia
This paper considers the desirability of the observed tendency of central banks to adjust interest rates only gradually in response to changes in economic conditions. It shows, in the context of a
Credit Spreads and Monetary Policy
We consider the desirability of modifying a standard Taylor rule for a central bank's interest rate policy to incorporate either an adjustment for changes in interest rate spreads (as proposed by
Simple Analytics of the Government Expenditure Multiplier
This paper explains the key factors that determine the effectiveness of government purchases as a means of increasing output and employment in New Keynesian models, through a series of simple
Interest-Rate Rules in an Estimated Sticky Price Model
This paper evaluates alternative rules by which the Fed may set interest rates using the small model of the U.S. economy estimated in Rotemberg and Woodford (1997). Our main substantive finding is
Optimal Interest-Rate Smoothing
This paper considers the desirability of the observed tendency of central banks to adjust interest rates only gradually in response to changes in economic conditions. It shows, in the context of a
The Taylor Rule and Optimal Monetary Policy
where it denotes the Fed’s operating target for the federal funds rate, pt is the inflation rate (measured by the GDP deflator), yt is the log of real GDP, and y# t is the log of potential output
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