Journal article

Publication year: 2009

Pages: 345-361

Journal: Journal of Macroeconomics

Volume number: 31

Issue number: 2

ISSN: 0164-0704

eISSN: 1873-152X

DOI Link: https://doi.org/10.1016/j.jmacro.2008.09.001

Publisher: Elsevier

Abstract: 
This paper studies whether monetary policy should respond to changes in monetary aggregates or stock market indices. Based on an empirical model of the US it presents estimates of how the inclusion of monetary aggregates or stock market indices in the central bank's information set affects the stabilization performance of an optimal monetary policy rule. It is shown that accounting for uncertainty about the structural relationships within the economy leads to a strong deterioration in the stabilization success of monetary policy reaction functions that respond to the growth rates of monetary aggregates or stock market indices. In addition it is analyzed whether money growth or changes in stock market indices help to explain US monetary policy in the recent years. (C) 2008 Elsevier Inc. All rights reserved.

Harvard Citation style: Mandler, M. (2009) In search of robust monetary policy rules - Should the Fed look at money growth or stock market performance?, Journal of Macroeconomics, 31(2), pp. 345-361. https://doi.org/10.1016/j.jmacro.2008.09.001

APA Citation style: Mandler, M. (2009). In search of robust monetary policy rules - Should the Fed look at money growth or stock market performance?. Journal of Macroeconomics. 31(2), 345-361. https://doi.org/10.1016/j.jmacro.2008.09.001