Monetary policy rules improve global financial stability, central bank effectiveness.
The article discusses the debate between using set rules or flexible discretion in making monetary policy decisions. Research shows that using rules based on economic models can help central bankers make better decisions. While it's hard to draw a clear line between rules and discretion, research has influenced how central banks operate. Central bank independence is important, but sometimes policies stray from rule-based approaches. Recent focus in the US has been on using policy rules to guide monetary policy.