Testing two types of monetary rules for Brazil

Abstract

The purpose of this paper is to verify whether, if a monetary rule had been in effect, it would have resulted in smoother non-inflationary nominal GDPpaths over the period 1974.1-1992.111. Two types ofrules are considered. The first is an activist rule proposed by McCallum (1987, 1988), and the second is a non-activist rule proposed by Meltzer (1987). The results ofthe simulations indicate that neither ofthe two rules performed well during the period analyzed.

Keywords

• rules
• discretion
• credibility
• flexibility
• simulation