Friedman's Money Supply Rule versus Optimal Interest Rate Policy
| dc.contributor.author | Evans, George W., 1949- | |
| dc.contributor.author | Honkapohja, Seppo, 1951- | |
| dc.date.accessioned | 2003-12-15T19:08:19Z | |
| dc.date.available | 2003-12-15T19:08:19Z | |
| dc.date.issued | 2003-07-12 | |
| dc.description.abstract | Using New Keynesian models, we compare Friedman's k-percent money supply rule to optimal interest rate setting, with respect to determinacy, stability under learning and optimality. First we review the recent literature: open-loop interest rate rules are subject to indeterminacy and instability problems, but a properly chosen expectations-based rule yields determinacy and stability under learning, and implements optimal policy. We show that Friedman's rule also can generate equilibria that are determinate and stable under learning. However, computing the mean quadratic welfare loss, we find for calibrated models that Friedman's rule performs poorly when compared to the optimal interest rate rule. | en |
| dc.format.extent | 320,062 bytes | |
| dc.format.mimetype | application/pdf | |
| dc.identifier.uri | https://hdl.handle.net/1794/128 | |
| dc.language.iso | en_US | |
| dc.publisher | University of Oregon, Dept of Economics | en |
| dc.relation.ispartofseries | University of Oregon Economics Department Working Papers;2003-30 | |
| dc.subject | Macroeconomics and monetary economics | en |
| dc.subject | Prices, business fluctuations, and cycles | en |
| dc.subject | Monetary policy | en |
| dc.subject | Central banking, and the supply of money and credit | en |
| dc.subject | Monetary policy (Targets, instruments, and effects) | en |
| dc.subject | Price level | en |
| dc.subject | Inflation (Finance) | en |
| dc.subject | Deflation (Finance) | en |
| dc.title | Friedman's Money Supply Rule versus Optimal Interest Rate Policy | en |
| dc.type | Working Paper | en |