U Rules and Discretion in Monetary Policy
نویسندگان
چکیده
HOULD MONETARY POLICY be determined by a legislated rule or by a monetary authority’s discretion? Henry Simons (1936) first raised this issue as a choice between rules and authorities, terms little different than those used in recent discussions. He stresses the value of a rule, such as a law, instead of reliance on an authority’s discretion because “definite, stable, legislative rules of the game as to money are of paramount importance to the survival of a system based on freedom of enterprise.” Though Simons mentions that laws can change and therefore a rule does not eliminate uncertainty about monetary legislation, his principal focus is the undesirability of delegating power to a monetary authority with a mandate to pursue only very broad goals. Others, for example Modigliani (1977), have argued that monetary policy conducted by just such an expert monetary authority will enhance the economy’s performance.
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