Promulgated in 2005, the Fiscal Responsibility and Debt Limitation Act (FRDLA) is a rule-based policy
'to provide for reduction of Federal fiscal deficit and ratio of public debt to gross domestic product to a prudent level by effective public debt management'.
No official money has been tied to gold (or any other real asset) since 1971, and during this time one rule-based policy
after another has been adopted and eventually jettisoned.
We return to this central idea to show how a central bank can achieve the gains of a rule-based policy
without publicly stating a specific rule.
is one useful mechanism to enhance the credibility of commitment, but it is not perfect.
"The move towards rule-based policy
from a discretion-based one will bring more clarity to how policy works." Focusing on consumer prices would bring the RBI's approach closer to counterparts from Indonesia to Europe to the United States, where the Federal Reserve's goal is to keep inflation around 2 per cent.
Thus, he proposes a rule-based policy
structure, i.e., dollar, euro, and yen should commit to inflation between 0-2 percent and any other country which wishes to import low inflation can follow any of the three currencies.
In the short-run discretionary policy is preferred to rule-based policy
for two reasons: first, the Governors of the Bank of England are quite able to decide for themselves what is the best course of action, what is going to happen next, and second
Kydland and Prescott argued in favour of a rule-based policy
, where policymakers commit to a certain pattern of behaviour.
Topics include a quantitative approach to IT investment allocation, a distributed tabling algorithm for rule-based policy
systems, a basis for comparing characteristics of policy systems, and policy languages for digital identity management in federation systems.
(4.) See Svensson (2001) for a more extensive discussion of rule-based policy
Decker, Warren and John Morello, "The American Debate Association: Rule-Based Policy
Debate," Argumentation and Advocacy 27 (1990): 58-67.
(10) Until the public was able to observe low inflation and relatively stable nominal GDP growth for a considerable length of time, the credibility of a rule-based policy
would likely depend on the public's ability to verify that the monetary authority was actually following the rule when setting targets for money growth.