COWLES FOUNDATION FOR RESEARCH IN ECONOMICS
AT YALE UNIVERSITY

Box 208281
New Haven, CT 06520-8281

COWLES FOUNDATION DISCUSSION PAPER NO. 1091

Evaluating Alternative Monetary Policy Rules

Ray C. Fair and E. Philip Howrey

February 1995

This paper examines monetary policy from an optimal control perspective. Three loss functions are minimized for each of three models, and the results are compared. The three loss functions target nominal growth, real growth, and inflation, respectively. The three models are a small structural model, a VAR model, and a large structural model. A numerical procedure is presented that can handle a variety of loss functions and models.

Keywords: Monetary rules, Optimal Fed behavior

JEL Classification: E52

See CFP 940