Monetary policy rules across OECD countries

Abstract

This paper provides empirical evidence on cross-country monetary policy rules for the major OECD countries during the 1979Q2 to 1998Q4 period. The results point to a convergence of monetary policy practices towards a strict anti-inflation policy in the post-1987Q3 period. From 1979Q3 to 1987Q2, there is evidence of an accommodative monetary policy. Comparing the performance of alternative measures of inflation, PPI appears to have played an implicit role of target inflation rate in the latter period. Such a policy avoids unnecessary fluctuations in the nominal interest rate, which only reacts to disturbances that affect domestic variables.