Monetary Policy Rules and Macroeconomic Stability: Some New Evidence

Mavroeidis, Sophocles

doi:10.1257/aer.100.1.491

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American Economic Review: Vol. 100 No. 1 (March 2010)

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Monetary Policy Rules and Macroeconomic Stability: Some New Evidence

Article Citation

Mavroeidis, Sophocles. 2010. "Monetary Policy Rules and Macroeconomic Stability: Some New Evidence." American Economic Review, 100(1): 491-503.

DOI: 10.1257/aer.100.1.491

Abstract

I revisit the question of indeterminacy in US monetary policy using limited-information identification-robust methods. I find that the conclusions of Clarida, Galí, and Gernter (2000) that policy was inactive before 1979 are robust, but the evidence over the Volcker-Greenspan periods is inconclusive. I show that this is in fact consistent with policy being active over that period. Problems of identification also arise because policy reaction has been more gradual recently. At a methodological level, the paper demonstrates that identification issues should be taken seriously, and that identification-robust methods can be informative even when they produce wide confidence sets. (E31, E32, E52, E65,)

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Authors

Mavroeidis, Sophocles (Brown U)

JEL Classifications

E31: Price Level; Inflation; Deflation
E32: Business Fluctuations; Cycles
E52: Monetary Policy
E65: Studies of Particular Policy Episodes