Topic: Q &A
Type of paper: Q&A
Discipline: Economics : Economics
Format or citation style: APA
Readings and Questions:
Whelan, Karl. Introducing the IS-MP-PC Model, pages 19-30.
Mishkin, FS. Improving the use of discretion in monetary policy. International Finance. 2018; 21: 224– 238. https://doi.org/10.1111/infi.12337
Differentiate between policy rules and discretion. What is the policy rule used in our text (Whelan)? Explain the components of that policy rule.
Why do some economists argue in favor of policy rules? Explain the time-inconsistency problem for policymakers. Does Mishkin believe time-inconsistency is a substantial problem? Explain.
Explain the arguments in favor of discretion in policy making. Explain how these arguments are or are not reflected in Chairman Jerome Powell’s speech Monetary Policy in a Changing Economy, https://www.federalreserve.gov/newsevents/speech/powell20180824a.htm.
Explain how Mishkin uses the Great Recession to illustrate the rules versus discretion debate. Was discretion an appropriate policy choice? Explain thoroughly.
What is “constrained discretion”?
What is a “nominal anchor”? What is the nominal anchor in the United States?
Differentiate between data-based and time-based forward guidance. Which type of guidance is best supports effective policy making. Explain, including reference to empirical example.
This is a requirement, and the textbook link is https://www.karlwhelan.com/Macro2/Notes1.pdf