2. Monetary Policy Rule A basic monetary policy rule we discussed is that when inflation changes unexpectedly the central bank should adjust its policy rate in the same direction and more than the change in inflation. Why is this thought of as an essential move by the central bank?

ECON MACRO
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ISBN:9781337000529
Author:William A. McEachern
Publisher:William A. McEachern
Chapter15: Monetary Theory And Policy
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7.

2. Monetary Policy Rule
A basic monetary policy rule we discussed is that when inflation changes
unexpectedly the central bank should adjust its policy rate in the same direction
and more than the change in inflation. Why is this thought of as an essential
move by the central bank?
Transcribed Image Text:2. Monetary Policy Rule A basic monetary policy rule we discussed is that when inflation changes unexpectedly the central bank should adjust its policy rate in the same direction and more than the change in inflation. Why is this thought of as an essential move by the central bank?
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