Policy Rule
A commitment to a fixed strategy no matter what happens to other economic variables.
Rules can directly limit the actions taken by a monetary authority. For example, one simple possible rule would be that the monetary authority hold the monetary base constant. This clearly restricts the use of judgment.
Rules can directly limit the actions taken by a monetary authority. For example, one simple possible rule would be that the monetary authority hold the monetary base constant. This clearly restricts the use of judgment.