Macroeconomics Commons^™

Monetary Convergence And Risk Premiums In The Eu Accession Countries, Lucjan Orlowski

WCBT Faculty Publications

This study examines the impact of various monetary policy regimes on the ability to lower inflation and exchange rate risk premiums in the EU accession countries as they undergo monetary convergence to the eurozone. It proposes a monetary policy framework of flexible targeting of relative inflation risk premium that is believed to be credible and useful for managing these two categories of risk. A model of inflation and exchange rate risk premiums within the context of inflation targeting is developed. Recent trends in these risk premiums in Hungary, the Czech Republic and Poland are tested by employing the threshold ARCH …

Evaluating Mccallum's Rule For Monetary Policy, Dean D. Croushore, Tom Stark

Economics Faculty Publications

Some economists have proposed that the Federal Reserve follow a rigid rule for conducting monetary policy. A policy rule is a formula that tells the Fed how to set monetary policy. For example, in 1959 Milton Friedman argued that the Fed should increase the money supply a constant 4 percent each year to eliminate inflation and avoid destabilizing the economy. More recently, other economists have identified an additional benefit: a rule can eliminate the inflationary bias that could occur when discretionary monetary policy is used. Under a discretionary policy, decisions are made on a case-by-case basis.

But economists don't agree …