#2006-010A "Monetary and Fiscal Theories of the Price Level: The Irreconcilable Differences"
by Bennett T. McCallum, and Edward Nelson
February 2006

The fiscal theory of the price level (FTPL) has attracted much attention but disagreement remains concerning its defining characteristics. Some writers have emphasized implications regarding interest-rate pegging and determinacy of RE solutions, whereas others have stressed its capacity to generate equilibria in which price level trajectories mimic those of bonds and differ drastically from those of money supplies. More...

PUBLISHED: Oxford Review of Economic Policy, Winter 2005, 21(4), pp. 565-83

#2004-011A "Targeting vs. Instrument Rules for Monetary Policy"
by Bennett T. McCallum, and Edward Nelson
June 2004

Svensson (2003) argues strongly that specific targeting rules–first order optimality conditions for a specific objective function and model–are normatively superior to instrument rules for the conduct of monetary policy. That argument is based largely upon four main objections to the latter plus a claim concerning the relative interest-instrument variability entailed by the two approaches. More...

PUBLISHED: Federal Reserve Bank of St. Louis Review, September/October 2005, 87(5), pp. 597-611