Munich Personal RePEc Archive

A Monetary Policy Rule using Gravity Models

Peña, Guillermo (2021): A Monetary Policy Rule using Gravity Models.

[thumbnail of MPRA_paper_105967.pdf]

Download (853kB) | Preview


Monetary policy, when rules-based, usually follows rules regarding inflation or output, but not always quantity, endemic and financial endogenous rules that minimize the gap between optimal and current rates of inflation and output. This paper proposes a rules-based monetary policy focused on reducing differences between short-term Treasury bill and implicit pure interest rate given by gravity models. Satisfying this rule is highly explanatory for reaching potential GDP growth, and for inflation targets such as the 2%. The results are confirmed with worldwide data. Central Banks could follow this rule, or combinations with other complementary alternatives, when deciding rates and amounts.

Atom RSS 1.0 RSS 2.0

Contact us: mpra@ub.uni-muenchen.de

This repository has been built using EPrints software.

MPRA is a RePEc service hosted by Logo of the University Library LMU Munich.