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Vol. 34. Issue 95.
Pages 62-72 (May - August 2011)
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Vol. 34. Issue 95.
Pages 62-72 (May - August 2011)
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Price stability and monetary policy: A proposal of a non active policy rule
Estabilidad de precios y estabilidad monetaria: una propuesta de una regla monetaria no activa
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Juan E. Castañedaa,
Corresponding author
jcastanedaf@cee.uned.es

Corresponding author.
, Geoffrey E. Woodb
a Departamento de Economía Aplicada y Gestión Pública, UNED, Madrid, Spain
b Faculty of Finance, Cass Business School, London, United Kingdom
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Abstract

A new type of monetary policy rule designed to achieve both price and output stability has increasingly been recommended during the last business cycle expansion, prior to the 2007 crisis. This type of rule implies “active” reaction functions. Based on the new Keynesian approach to monetary economics, these rules prescribe an active response by the central bank in the face of any shock that shifts prices or output from target, which leads to excessive money creation. Here, a less active type of reaction function is proposed; one in which price stability is the long run target, but permitting prices to respond to changes originating in real disturbances. It is argued that the resulting policy delivers outcomes preferable to currently popular rules.

Keywords:
Reaction function
Neutral monetary policy
Monetary rule
Taylor rule
Resumen

Durante la última etapa expansiva de la economía, previa a la crisis iniciada en 2007, se propusieron nuevas reglas monetarias dirigidas a estabilizar tanto la inflación como la actividad económica alrededor de ciertos objetivos. Este tipo de reglas implican la intervención frecuente en la economía a través de la aplicación de funciones de reacción activas. Basadas en modelos Neo-Keynesianos, estas funciones de reacción prescriben la intervención activa del banco central para corregir cualquier desviación de la inflación y del output gap de sus objetivos, lo que conduce a un exceso de creación de liquidez en la economía. En su lugar, proponemos en este trabajo una función de reacción menos activa, que tenga un objetivo de estabilidad de precios a medio y largo plazo, pero que permita las variaciones de precios debidas a cambios en la productividad. Concluímos que este tipo de reglas menos activas conducen a mejores resultados que las funciones basadas en la conocida regla de Taylor.

Palabras clave:
Function de reacción
Política monetaria neutral
Regla monetaria
Regla de Taylor
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