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Simulating the Effects of Some Simple Coordinated versus Uncoordinated Policy Rules
Author:
International Monetary Fund
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Series:
IMF Working Papers
Volume/Issue:
Volume 1989: Issue 017
Language:
English
Publication Date:
01 Jan 1989
DOI:
https://doi.org/10.5089/9781451922875.001
ISBN:
9781451922875
ISSN:
1018-5941
Pages:
48
Keywords:
WP; government spending; policy rule; money demand; real GDP; current account; nominal interest rate; terms of trade; root mean square; Managed exchange rates; Real exchange rates; Exchange rates; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Effects of different policy rules are simulated: uncoordinated targeting of the money supply or nominal income, use of monetary policy to achieve coordinated targets for nominal or real exchange rates, and the use of monetary and fiscal policies to hit targets for internal and external balance. The following conclusions emerge: rules which performed best for some shocks performed poorly for others; monetary policy was ineffective in limiting movements in real exchange rates; unconstrained use of fiscal policy was quite powerful in influencing real variables; and dynamic instability was a potentially serious problem. Robustness to different specifications and to constraints on instruments remains to be examined.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund