A Guide to Nominal Feedback Rules and Their Use for Monetary Policy
If price stability is to be sustained, monetary policy actions will inevitably resemble—in the long run—the prescriptions from nominal feedback rules, which are designed to achieve price stability. This property means that monetary policy might be well described by a nominal feedback rule in a low-inflation country such as Switzerland. The authors provide a general description of nominal feedback rules and use one rule—with time-varying parameters—to model Swiss monetary policy actions. They also explain how this indicator model can presage a buildup of inflationary pressures before they become obvious through other traditional policy indicators.