These typically used fiscal and monetary policy to adjust inflation, output, and unemployment. Discretionary central banking is also plagued by the incentive problem . Organizations such an expansionary monetary policy making investment is a result would adjust to discretionary. However, following the stagflation of the 1970s, policymakers were attracted to policy rules. Discretionary monetary policy is essentially throwing darts at a moving target while blindfolded. He concludes that a rule-based approach is superior and may have been able to prevent the 2008–2009 financial … America needed to decide macroeconomic policy in not by the real wealth generators is inflation. The rates are-similar because banks can readily substitute between them. A targeting rule is a monetary policy rule that sets the policy instrument. The debate over “rules vs. discretion” was a centerpiece of disputes over monetary policy during the 1960s-1980s. rules, policy rule definition and spending enough to stabilize total picture of inflation rather than the diversity. macroeconomic policy rules, like the well-known Taylor rule for monetary policy.5 In the spirit of the 4 This systematic part of macroeconomic policies that is based on policy rules is also often referred to as the anticipated part of macroeconomic policies, whereas the discretionary, non-systematic part of macroeconomic policies -the policy Discretionary Policy. Fixed-Rule Policy: A fiscal or monetary policy designed to be an economic goal or target of a government. Salter provides a framework to help policymakers better understand how incentives and information can affect monetary policy and discusses discretion-based and rule-based approaches to monetary policy. A rule based monetary policy envisions that monetary authority should increase money supply according to some fixed rule which … Discretionary monetary policy is a more flexible approach whereby central bankers at the Fed can quickly react to changing factors to tweak the economy, especially in an unusual situation. A key question is whether monetary policy would better achieve this goal via strict policy rules or a discretionary framework. Monetary policy refers to the Federal Reserve's work with the money supply to influence the economy. A discretionary policy is supported because it allows policymakers to respond quickly to events. 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