In 1981, Alexandre Lámfalussy published a BIS (Bank for International Settlements) Economic Paper bearing a title that has lost none of its topicality: “Rules versus Discretion: An Essay on Monetary Policy in an Inflationary Environment.” In this paper, Mr. Lámfalussy addresses some of the most pressing questions that dominate our current monetary policy discussions.
In particular, he raises the question how to minimize the short-term costs and trade-offs of anti-inflationary monetary policy. And even back in 1981, his answers to this question were decisively modern. In his view, the crux to effectively fighting inflation at minimum costs lies in defusing the public’s inflation Motto, R., M. Rostagno, J. Yiangou, A. Saint-Guilhem, G. Carboni, W. Lemke and C. Altavilla.