A guide to nominal feedback rules and their use for monetary policy

If price stability is to be sustained, monetary policy actions will inevitably resemble - in the long run - the prescriptions from nominal feedback rules, which are designed to achieve price stability. This property means that monetary policy might be well described by a nominal feedback rule in a low-inflation country such as Switzerland. In this article, Michael J. Dueker an Andreas M. Fischer provide a general description of nominal feedback rules and use one rule - with time-varying parameters - to model Swiss monetary policy actions. The authors explain how this indicator model can presage a buildup of inflationary pressures before they become obvious through other traditional policy indicators.