Modified K-percent Rule
Economists and policy makers have modified Friedman's k-percent rule and have developed more sophiscticated rules for framing monetary policy, using the K-percent rule as a base. Joachim Scheide, head of the Forecasting Center at the Kiel Institute for the World Economy in Germany has modified the k-percent rule to make it more applicable in context of Germany's economy. He uses three new variables "nominal domestic demand," "central bank money" and "error term with the standard characteristics" to give a more suitable model. The k-percent rule is considered as a no feedback rule, which does not allow central banks to alter monetary policy to adjust to current economic situations; thus, it is not effective in the short term.
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