September 7, 2016

Monetary Rules for a Post-Crisis World

Scott Sumner

Ralph G. Hawtrey Chair of Monetary Policy

David Beckworth

Senior Research Fellow

Central banks' part in the Great Recession, and the lackluster recovery since, are reviving interest in monetary rules. That revival raises crucial questions. Might the Federal Reserve and other central banks have performed better if they’d adhered to monetary policy rules? Could rules have avoided the crisis altogether? Can they avoid future crises? If so, which rules work best? Can a monetary policy rule work even in a world of near-zero, or negative, interest rates?