Are there benefits to a monetary rule in the EMU?
Abstract
In order to achieve their price stability goal, central banks can choose between an interest rate regulation or a monetary base one. Until now the first instrument has generally been adopted. This choice is reexamined here through nominal GDP rules, like McCallum's ones, in which the choice of instrument plays a crucial role. Our simulations of these rules in several European countries, suggest (on the basis of their macroeconomic results) that the superiority of a short rate instrument shouldn't be taken a priori for granted.
Domains
Economics and Finance
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