This paper asks whether relations of the IS-LM type can sensibly be used for the aggregate demand portion of a dynamic optimizing general equilibrium model intended for analysis of issues regarding monetary policy and cyclical fluctuations. The main result is that only one change -- the addition...

Svensson (JEL, 2003) argues strongly that specific targeting rules first order optimality conditions for a specific objective function and model are normatively superior to instrument rules for the conduct of monetary policy. That argument is based largely upon four main objections to the latter...

This paper presents stochastic simulation results pertaining to the performance of nominal income targeting, here represented as a monetary policy rule that sets quarterly values of an interest rate instrument in response to deviations on existing studies of nominal income growth from a...

The fiscal theory of the price level (FTPL) has attracted much attention but disagreement remains concerning its defining characteristics. Some writers have emphasized implications regarding interest-rate pegging and determinacy of RE solutions, whereas others have stressed its capacity to...

This paper reports results of simulation exercises that explore several questions relating to the design of rules for monetary policy. Emphasis is given to issues raised by the concept of rule operationality, i.e., reliance on feasible instrument variables and information sets. Many of the...

This paper reviews empirical findings, econometric issues,and theoretical results bearing upon the "monetary vs. fiscal policy" debate that began with the 1963 Friedrnan-Meiselman study.The main substantive conclusions are not very dramatic.The clearest is that an open-market increase in the...

This paper reconsiders a result obtained by Sargent and Wallace, namely, that price level indeterminacy obtains in their well-known model if the monetary authorities adopt a policy feedback rule for the interest rate rather than the money stock. Since the Federal Reserve seems often to have used...

This paper addresses a prominent empirical failure of the expectations theory of the term structure of interest rates under the assumption of rational expectations. This failure concerns the magnitude of slope coefficients in regressions of short rate (or long- rate) changes on long-short...

Recent experience does not include a "monetarist experiment," as some have argued, but may slightly reinforce preexisting reasons for doubting that the best way of formulating monetarist policy prescriptions is in the form of a constant growth rule for the money stock.A more desirable rule would...

This paper considers whether 'liquidity trap' issues have important bearing on the desirability of inflation targeting as a strategy for monetary policy. From a theoretical perspective, it has been suggested that 'expectation trap' and 'indeterminacy' dangers are created by variants of inflation...