Dallas Fed paper analyses monetary policy rules

Results are in “stark contrast” to previous research, authors say

Federal Reserve Bank of Dallas
Photo: Andreas Praefcke

An excessive focus on inflation in a monetary policy rule can cause welfare losses, a team of researchers from the Dallas Fed finds in new working paper.

Daisuke Ikeda and Takushi Kurozumi investigate to what extent monetary policy is able to improve social welfare in a slow post-crisis recovery. They question whether monetary policy should focus primarily on inflation stabilisation as opposed to output stabilisation.

The authors analyse a group of monetary policy rules using US data. Their

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