1. Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory By Richard Clarida, Jordi Gali and Mark Gertler In The Quarterly Journal of Economics, February 2000, Vol. 115, No. 1, pp. 147-180 Presented By Derrek Grunfelder-McCrank, Brandon Hinneberg, and Anthony Galston

2. Key Question Addressed in Paper How was the role of monetary policy different pre-1979 and post-1979?

3. Main Findings Pre-Volcker Era ◦ Highly accommodative to expected increases in inflation Volcker-Greenspan Era ◦ Responded to higher expected inflation ◦ Controlling inflation ◦ Forward-looking approach

4. Outline of Presentation Background Information Data Models Results Conclusion

5. Background Info 1960s to 1980s vs. Post-1980s Supply shocks? Change in the role of monetary policy? Pre-Volcker vs. Volcker-Greenspan

6. Data Quarterly time series from 1960:1-1996:4 Instrument set

7. Models Simple Forward-Looking Rule

8. Models Implied Real Rate Rule

9. Models Interest Rate Smoothing and Exogenous Shocks

10. Models “A comprehensive analysis of the quantitative properties of the model is beyond the scope of the present paper.” (pg. 169) A comprehensive analysis of the quantitative properties of the model is beyond the scope of the present presentation.

11. Results

12. Results

13. Results

14. Results

15. Conclusions Simple Forward-Looking Policy Reaction Function Significant differences pre-Volcker (pre- 1979) and Volcker-Greenspan (post-1979)