Monetarist Rules in the Light of Recent Experience
AbstractRecent experience does not include a "monetarist experiment," as some have argued, but may slightly reinforce preexisting reasons for doubting that the best way of formulating monetarist policy prescriptions is in the form of a constant growth rule for the money stock.A more desirable rule would pertain to the monetary base, which is much more directly under Fed control. While a constant base growth rule might provide good macroeconomic performance, better results should be obtainable from a rule that at regular intervals adjusts the base growth rate upward or downward depending on whether nominal GNP is below or above a target path that specifies constant, non-inflationary growth for that variable. This type of rule is activist, to an extent, but is non-discretionary.The implied absence of policy-making flexibility is desirable for reasons explained in the literature on dynamic inconsistency.
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Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Review.
Volume (Year): 74 (1984)
Issue (Month): 2 (May)
Other versions of this item:
- Bennett T. McCallum, 1984. "Monetarist Rules in the Light of Recent Experience," NBER Working Papers 1277, National Bureau of Economic Research, Inc.
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