Discretionary Monetary Policy Versus Rules: The Japanese Experience During 1986-91

August 1, 1992

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper compares the hypothetical performance of various monetary policy rules with that of the discretionary policies actually pursued in Japan over the 1986-91 period. The results suggest that simple rules based on targeting growth in either the money supply, nominal income, or prices would have failed to stabilize economic variables more successfully than discretionary policies. At the same time, it appears that an indicator of monetary conditions incorporating movements in the real exchange rate and the real interest rate would have been useful in assessing the effect of current policies on future activity.

Subject: Exchange rates, Financial services, Foreign exchange, Inflation, National accounts, Personal income, Prices, Real interest rates, Short term interest rates

Keywords: Exchange rates, Inflation, inflation change, inflation rule, inflation target, money demand, movements vis-á-vis, nominal interest rate, Personal income, reaction function, Real interest rates, Short term interest rates, target inflation, WP

Pages:
28
Volume:
1992
DOI:
https://doi.org/10.5089/9781451848335.001
Issue:
063
Series:
Working Paper No. 1992/063
Stock No:
WPIEA0631992
ISBN:
9781451848335
ISSN:
1018-5941

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