Bank of Canada

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Title	The Role of Simple Rules in the Conduct of Canadian Monetary Policy
Author(s)	Denise Côté, Jean-Paul Lam, Ying Liu, and Pierre St-Amant
Type	Bank of Canada Review article
Date of publication	Summer 2002
Language	English
Abstract	The third strategy employed by the Bank when dealing with uncertainty is the consideration of appropriate simple reaction functions or "rules" for the setting of the policy interest rate. Since John Taylor's presentation of his much-discussed rule, research on simple policy rules has exploded. Simple rules have several advantages. In particular, they are easy to construct and communicate and are believed by some to be robust, in the sense of generating good results in a variety of economic models. This article provides an overview of the recent research regarding the usefulness and robustness of simple monetary policy rules, particularly in models of the Canadian economy. It also describes and explains the role of simple rules in the conduct of monetary policy in Canada.
Bank topic index	Uncertainty and Monetary Policy
JEL classification

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