Ball’s (1999) Rule for Open Economy Monetary Policy
This text discusses a family of simple monetary policy rules that are designed for open economies. The rules are based on Ball’s (1999) rule, which responds to deviations of inflation from target and output from potential, as well as the real exchange rate. The authors argue that these rules are more effective than closed-economy rules because they exploit the exchange rate channel of monetary transmission.
Here are some of the key points from the text:
- Open economy monetary policy rules are more effective than closed-economy rules because they exploit the exchange rate channel of monetary transmission.
- There are a number of different variants of Ball’s (1999) rule, each with its own advantages and disadvantages.
- The authors argue that the best rule for a particular economy will depend on the specific characteristics of that economy.
For more information, please see the following resources:
- Ball, L. (1999). Monetary policy rules in an open economy. Journal of Monetary Economics, 44(3), 539-566.
- Clarida, R., Gali, J., & Gertler, M. (2000). Monetary policy rules in practice: Some international evidence. The European Economic Review, 44(4), 1033-1067.
- Woodford, M. (2003). Interest and prices: Foundations of monetary economics. Princeton University Press.