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"Estimates of the Effectiveness of Monetary Policy,"
Journal of Money, Credit and Banking, August 2005, 645-660,
pdf file (568 KB)..
This paper examines various interest rate rules, as well as policies
solving optimal control problems, for their ability to dampen economic
fluctuations caused by random shocks. A tax rate rule is also considered.
A multicountry econometric model is used for the experiments. The
results differ sharply from those obtained using recent models
in which the coefficient on inflation in the nominal interest rate
rule must be greater than one in order for the economy to be stable.