Discretionary Monetary Policy Versus Rules: The Japanese Experience During 1986-91
IMF Working Papers, August 1, 1992
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- Discretionary Monetary Policy Versus Rules: The Japanese Experience During 1986-91
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Bibliographic details
- Authors: Guy M Meredith
- Published: August 1, 1992
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451848335.001
Overview
- Study compares hypothetical performance of various monetary policy rules with the discretionary policies actually pursued in Japan over the 1986-91 period.
- Paper by Guy M Meredith, published August 1, 1992.
- Core question: Would simple policy rules have stabilized economic variables more successfully than discretionary policy during 1986-91?
Key findings
- Simple rules based on targeting growth in the money supply, nominal income, or prices would have failed to stabilize economic variables more successfully than the discretionary policies actually pursued over 1986-91.
- An indicator of monetary conditions that incorporates 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.
Implications for policy assessment
- Reliance on simple targeting rules (money supply, nominal income, prices) may not guarantee better stabilization than discretionary actions in the Japanese context examined.
- Broader indicators of monetary conditions that include real exchange rate and real interest rate movements can improve assessment of policy effects on future activity.
Subjects and analytical focus
- Exchange rates
- Financial services
- Foreign exchange
- Inflation
- National accounts
- Personal income
- Prices
- Real interest rates
- Short term interest rates
Keywords emphasized in the paper
- Exchange rates
- Inflation; inflation change; inflation rule; inflation target; target inflation
- Money demand
- Movements vis-รก-vis; nominal interest rate
- Personal income
- Reaction function
- Real interest rates
- Short term interest rates
- WP
Source: Discretionary Monetary Policy Versus Rules: The Japanese Experience During 1986-91, Guy M Meredith, August 1, 1992.