On Patterns in Economic Data and Monetary Councils Decisions
The paper presents an attempt to identify decision rules which emulate policy decisions of monetary councils (councils) in Poland, United States and Japan. Policy decisions are defined as decisions concerning target interest rate changes. Generated decision rules emulate therefore monetary authorities' reaction function or policy rules. Accuracy of these rules is measured by the ratio of instances (decisions) correctly classified to the number of all instances under consideration. We take data-mining approach. Short term interest rate is a key monetary authorities' means of stabilizing business cycle in a short run. Friedman and Schwartz (1963) represents probably most influential empirical evidence that money matters for business-cycle fluctuation, and motivation for that kind of stabilizing policy.(original abstract)
- Clarida, R., Gali, J., Gertler, M., Monetary Policy Rules in Proctice: Some International Evidence, European Economic Review, 42, 1998, 1003 - 1067.
- Cote, D., Lam, J.P., Liu, Y., St-Amant, P., The Role of Simple Rules in the Conduct of Canadian Monetary Policy, Bank of Canada Rewiev, Summer 2002.
- Friedman, M., Schwartz, A., A Monetary History of the United States, 1867-1960, Princeton University Press, 1932.
- Hetzel, R. L., The Taylor Rule: Is It a Useful Guide to Understanding Monetary Policy?, Federal Reserve Board of Richmond Economic Quarterly 86 (Spring), 1-33.
- Jenkins, P., Longworth, D., Monetary policy and Uncertainty, Bank of Canada Rewiev, Summer 2002.
- Goodfriend, M., Monetary Policy in the New Neoclassical Synthesis: A Primer, Federal Reserve Bank of Richmond, International Finance Conference on "Stabilizing the Economy", July 2002.
- Judd, J. P., Glenn, D.R., Taylor's Rule and the Fed: 1970-1997, FRBSF Economic Review, Number 3,1998.
- King, R. G., Watson, M.W., Money, Prices, Interest Rates and Business Cycle, Review of Economics and Statistics, 78 (1), February, 1996, 35 - 53.
- Kydland, F. E., Prescott, E. C., Business Cycles: Real Facts and Monetary Myth, Federal Reserve Bank of Minneapolis Quarterly Review, 14, Spring 1990, 3-18.
- Lepper, E. M., Sims, C. A., Zha, T., What Does Monetary Policy Do?, Brookings Papers on Economic Activity, 2,1996,1-61.
- Lucas, R.E., Expectations and the Neutrality of Money, Journal of Economic Theory, 4 (2), April 1972, 103-124.
- Levin, A., Wieland, V., and Williams J. C., Robustness of Simple Monetary Policy Rules under Model Uncertainty, in: Monetary Policy Rules, J. B. Taylor ed. University of Chicago Press.
- Sims, C. A Review of Monetary Policy Rules, Journal of Economic Literature, 39.
- Taylor, J. B., Discretion Versus Policy Rules in Practice, Camegie-Rochester Conference Series on Public Policy (39), 1993, p. 193 - 215.
- Walsch, C. E. Monetary Theory and Policy, 2nd ed., The MIT Press, Cambridge, Massachusetts.
- Williams, J.C., Simple Rules for Monetary Policy, Board of Governors of the Federal Reserve System, February 1999.