Money stock targeting, base drift, and price-level predictability : Lessons from the U.K. Experience
AbstractIt is controversial whether money stock targeting without base drift (i.e. following a trend-stationary growth path) makes the price level more predictable in the presence of permanent shocks to money demand. Developing a procedure that does not run into the Lucas critique, and applying this procedure to the case of the U.K., the paper finds that the variance of the trend inflation rate in the U.K. would have been reduced by more than one half if the Bank of England had not allowed base drift.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Monetary Economics.
Volume (Year): 25 (1990)
Issue (Month): 2 (March)
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Web page: http://www.elsevier.com/locate/inca/505566
Other versions of this item:
- Michael D. Bordo & Ehsan U. Choudhri & Anna J. Schwartz, 1991. "Money Stock Targeting, Base Drift and Price-Level Predictability: Lessons From the U.K. Experience," NBER Working Papers 2825, National Bureau of Economic Research, Inc.
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