In economics, what is Tinbergen rule?


This refers to a rule of thumb which states that policymakers trying to achieve multiple economic targets need to have control over at least one policy tool for each policy target. This is because the achievement of certain economic targets precludes the achievement of others. For instance, a central bank with just the power to influence the money supply in the overall economy can only control either inflation or the exchange rate. It cannot simultaneously ensure low inflation and a depreciating currency because decreasing the money supply to lower inflation will cause currency appreciation. The rule was formulated by Dutch economist Jan Tinbergen.

Our code of editorial values

Related Topics
This article is closed for comments.
Please Email the Editor

Printable version | Jun 12, 2021 12:40:45 AM |

Next Story