complex-valued eigenvalues, computational techniques, cyclic convergence, macroeconomics, monotonic convergence, real-valued eigenvalues, saddle-path instability,

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A stylized representation of the check‐list approach to monetary policy is developed. In order to examine this approach in a formal framework the literature on optimal money supply rules is extended with the check‐list being interpreted as an optimal money supply rule that depends on many variables and attempts to keep the economy on a preplanned path despite unexpected shocks. The strengths and weaknesses of the check‐list approach are then examined

No abstract

This article argues that the recent implementation of monetary policy in Australia has been dominated by the response to a large range of unanticipated shocks. In the process of trying to minimise the adverse effects of such shocks, considerable uncertainty has been created about likely outcomes in the medium term. This makes medium-term objectives harder to achieve. Taking the reduction of inflation as an example of an appropriate medium-term objective, simulations are presented using the Murphy model of the Australian economy. The simulations demonstrate that a tightening of monetary policy will reduce inflation more slowly if private agents believe that the tightening is unlikely to be sustained for long. Under uncertainty, monetary policy will have to be tighter and real GDP significantly lower to achieve a given reduction in inflation. A confingency rule of medium complexity is suggested as one way in which appropriate medium-term objectives might be achieved while allowing some flexibility to react to unexpected outcomes in the short run. Copyright 1991 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research.