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Simple monetary rules: many strengths and few weaknesses

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  • John B. Taylor

    (Stanford University)

Abstract

This paper endeavors to examine the basic idea in Richard Epstein’s book Simple Rules for a Complex World. It does so by considering a specific simple rule which was explicitly designed for complex world. A basic idea in Epstein’s book is that the more complex is the world the better is the case for simple rules. To show this, he develops six simple rules pertaining to the rights of individuals, first possession, contracts, torts, government eminent domain and the power of taxation to provide public goods. This paper considers one rule rather than six rules, and it looks at monetary policy rather than policy in general. While the context is different, the case for simple rules made here provides a useful comparison with the case made by Epstein.

Suggested Citation

  • John B. Taylor, 2021. "Simple monetary rules: many strengths and few weaknesses," European Journal of Law and Economics, Springer, vol. 52(2), pages 267-283, December.
    • Handle: RePEc:kap:ejlwec:v:52:y:2021:i:2:d:10.1007_s10657-020-09683-1
    DOI: 10.1007/s10657-020-09683-1
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    Cited by:

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    3. Alessandro Piergallini, 2024. "Fiscal Stimulus of Last Resort," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 56(6), pages 1479-1514, September.
    4. Piergallini, Alessandro, 2022. "Average inflation targeting and macroeconomic stability," Economics Letters, Elsevier, vol. 219(C).
    5. Helder Ferreira de Mendonça & Cristiane Nascimento de Lima, 2023. "Does central bank credibility from professional forecasters and consumers affect the interest rate and its expectations?," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 51(4), pages 895-918, October.
    6. Feld, Lars P. & Fuest, Clemens & Haucap, Justus & Schweitzer, Heike & Wieland, Volker & Wigger, Berthold U., 2021. "The monetary policy strategy of the European Central Bank: Review and recommendations," Kronberger Kreis-Studien 67e, Stiftung Marktwirtschaft / The Market Economy Foundation, Berlin.
    7. Salha Ben Salem & Moez Labidi, 2024. "Financial friction and optimal monetary policy: analysis of DSGE model with financial friction and price sticky," SN Business & Economics, Springer, vol. 4(7), pages 1-24, July.

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    More about this item

    Keywords

    Rules; Discretion; Complexity; Monetary policy; Taylor rule; Zero-bound;
    All these keywords.

    JEL classification:

    • K1 - Law and Economics - - Basic Areas of Law
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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