Stanley FischerVice Chairman of the Board of Governors of the Federal Reserve System
1982, No. 1
AN important development in the methodology of policy evaluation research in macroeconomics is the growing emphasis on the effects of policy systems-operating either by institutional arrangement or formal policy rules-rather than on the effects of one-time changes in the policy instruments. For instance, many studies on monetary policy in recent years have focused on the effect of a system in which the money supply systematically responds to the state of economic activity; previously the focus was on the effect of a change in the money supply at a particular date. Recent examples of policy proposals resulting from such research include rules for the Federal Reserve to increase interest rates by a certain amount whenever the consumer price index rises above a fixed target or, alternatively, rules to hold the growth rate of money constant except for temporary countercyclical deviations keyed to the unemployment rate or to the growth rate of nominal GNP. As these examples illustrate, proposals emerging from recent research do not necessarily entail fixed settings for the policy instruments as with earlier proposals for policy rules. Revived interest in gold or general commodity standards also reflects the recent emphasis on policy systems.
