Models and the Decision Making Mechanism in Monetary Policy
The basic question posed in the article pertains the monetary policy: should it be discretional in character or should it rely on some sound rules? The author discusses certain decision making rules (active and passive as well as instrumental and goal oriented) with the reference to models suggested by Taylor and Svensson and postulates that the potential output in these models be derived on the basis of production generated by full employment and not on the long term trend. Such a change would help the formulation of full employment policies. It is stressed that monetary policy, during the process of integration with the EU, should distinguish itself by a select character, since the standard rules for setting targets and implementing monetary policy decisions do not take the adjustment conditions into account. In effect of present day practice interest rates are set at too high levels. The article is concluded with the assessment of the results of high interest rates' policies as well as with the conclusions that address the mechanism of decision making.
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