From Monetary to Fiscal Policy Rule:a Matter of Adjustment or Choice

“From Monetary to Fiscal Policy Rule: a Matter of Adjustment or Choice,” published in Modern Economic Policy Approaches Macroeconomic Policy, (eds) Rochon L. P. and P. Gnos. Cheltenham, UK: Edward Elgar Publishing.

Introduction

During the last 10 years,economic policy has been dominated by a new analytical framework.

That synthesis,which has been called the "New consensus" approach (NCA) has received considerable attention in terms of theoritical and empirical discussion and is considered to be a significant departure for the development of research in the area of monetary policy.

The most prominent feature of the NCA is the adoption of Taylor's policy rule in place of the exercise of discrete policy.A by-product of the emphasis in policy rules is that in this new context, the quantity approach to money and the monetarist warnings on the role of monetary aggregates are abandoned.

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