Category Archives: Monetary Policy
Time Inconsistency Is Only One of Many Reasons to Favor Policy Rules
Advocates of purely discretionary monetary policy frequently list Kydland and Prescott’s time inconsistency argument as the only reason for policy rules, and then they try to shoot that down or say it is outweighed by arguments in favor of discretion. … Continue reading
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The Incredible Shifting Model
Robert Tetlow has published a fascinating research paper in the International Journal of Central Banking on policy robustness with the Fed’s FRB/US model. Perhaps the most important part of the paper is his careful documentation of the enormous shifts in the coefficients … Continue reading
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On Why The Economist Should Rule Rules In, Not Out
An old, but forever crucial, question for monetary policy is whether it should be rules-based or purely discretionary. The Economist, in a Free Exchange article this week with the title “Rule It Out,” goes all in for pure discretion, abandoning … Continue reading
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Does the Fed Have a Monetary Policy Strategy?
The subject of a monetary policy strategy for the Fed came up in Congressional hearings I testified at today and last week. Today the hearing focussed on the bill to require the Fed to describe its strategy or rule for the systematic … Continue reading
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Too Low For Too Long Or Global Saving Glut? Both!
In an interesting new paper, “The U.S. Housing Price Bubble: Bernanke versus Taylor,” forthcoming in Journal of Economics and Business, Abrar Fitwi, Scott Hein, and Jeffrey Mercer examine two possible causes of the housing price boom that preceded the financial … Continue reading
A Reawakening of Monetary Policy Research
Last May a group of economists, central bankers, market participants, and financial journalists convened at Stanford’s Hoover Institution “to put forth and discuss a set of policy recommendations that are consistent with and encourage a more rules-based policy for the Federal … Continue reading
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The Senate Moves Ahead on a Policy Rules Bill
Today the Chairman of Senate Banking Committee, Richard Shelby, released a draft bill entitled “The Financial Regulatory Improvement Act of 2015” covering a wide range of reforms. Like the widely-discussed House policy rules bill (Section 2 of HR 5018 of last … Continue reading
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A Monetary Policy for the Future
Yesterday I spoke at a panel on “Monetary Policy in the Future,” with Ben Bernanke and Gill Marcus at an IMF event Rethinking Macro Policy. A written version of my opening is posted below (longer than my usual post). Ben Bernanke … Continue reading
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Was Janet Yellen Test Driving the Policy Rule Bill?
In a speech last week Fed Chair Janet Yellen made use of policy rules, and in particular the Taylor rule, to explain her views on normalizing policy. This comes on the heels of Fed Vice-Chair Stanley Fischer’s reference to the … Continue reading
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Bernanke Says “The Fed Has a Rule.” But It’s Only Constrained Discretion and It Hasn’t Worked
In response to a question about the policy rules bill at Brookings recently, Ben Bernanke remarked that the “The Fed has a rule.” His claim surprised quite a few people, especially given the Fed’s resistance to the policy rules bill, so … Continue reading
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Economics One 