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Jonathan Benchimol (Bank of Israel) - Nominal Income versus Taylor-type rules in practice

Date and Time: September 2nd, 2016, 10:00 - 11:30 am

Room: A 101 in the Economics Building (Museum)


Since the beginning of the financial crisis, a lively debate has emerged regarding which monetary policy rule the Fed (and other central banks) should follow, if any. To clarify this debate, several questions must be answered. Which monetary policy rule fits best the historical data? Which monetary policy rule best minimizes economic uncertainty and the Fed´s loss function? Which rule is best in terms of household welfare? Among the different rules, are NGDP growth or level targeting rules a good option, and when? Do they perfrom better than Taylor-type rules? To answer these questions, we use Bayesian estimations to test the Smets and Wouters (2007) model under nine different monetary policy rules with US data from 1955 to 2015 and over three different sub-periods. We find that considering only the central bank´s loss function, the estimates generally indicate the superiority of NGDP level targeting rules, whatever the period. However, if other criteria are considered, the central bank´s objectives are not consistently met by a single rule for all periods.

About the Speaker

Dr. Jonathan Benchimol is Research Economist at the Bank of Israel. He received his PhD in Economics from the University of Paris1 Panthéon Sorbonne in 2011. http://www.jonathanbenchimol.com/research

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