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Avoiding significant monetary policy mistakes

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Author Info
Preston J. Miller
Gary H. Stern
Abstract

We deduce properties of optimal monetary policies based on modern theory and standard empirical findings. In light of this analysis, we examine FOMC policy procedures and conclude that they put too much emphasis on short-term economic stabilization and too little emphasis on longer-term price stability. We propose a form of inflation targeting to address this problem.

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File URL: http://minneapolisfed.org/research/QR/QR2821.pdf
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Publisher Info
Article provided by Federal Reserve Bank of Minneapolis in its journal Quarterly Review.

Volume (Year): (2004)
Issue (Month): Dec ()
Pages: 2-9
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Handle: RePEc:fip:fedmqr:y:2004:i:dec:p:2-9:n:v.28no.2

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Keywords: Monetary policy;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Edward C. Prescott, 1986. "Theory ahead of business cycle measurement," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 9-22. [Downloadable!]
    Other versions:
  2. Lars E.O. Svensson, 2002. "Monetary Policy and Real Stabilization," Working Papers 119, Princeton University, Department of Economics, Center for Economic Policy Studies.. [Downloadable!]
    Other versions:
  3. Andrew Atkeson & Patrick Kehoe, 2004. "Deflation and Depression: Is There and Empirical Link?," NBER Working Papers 10268, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. John C. Williams, 2003. "Simple rules for monetary policy," Economic Review, Federal Reserve Bank of San Francisco, pages 1-12. [Downloadable!]
    Other versions:
  5. repec:bep:maccon:v:3:y:2003:i:1:p:1089-1089 is not listed on IDEAS
  6. S. Rao Aiyagari, 1988. "Economic fluctuations without shocks to fundamentals; or, does the stock market dance to its own music?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 8-24. [Downloadable!]
  7. Jane Ihrig & Jaime Marquez, 2003. "An empirical analysis of inflation in OECD countries," International Finance Discussion Papers 765, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  8. Satyajit Chatterjee & Dean Corbae, 2003. "On the welfare gains of eliminating a small likelihood of economic crises: A case for stabilization policies?," Working Papers 03-20, Federal Reserve Bank of Philadelphia. [Downloadable!]
  9. Eric M. Leeper & Jennifer E. Roush, 2003. "Putting "M" back in monetary policy," International Finance Discussion Papers 761, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  10. Ben S. Bernanke, 2003. "Friedman's monetary framework: some lessons," Proceedings, Federal Reserve Bank of Dallas, issue Oct, pages 207-214. [Downloadable!]
  11. George T. McCandless, Jr. & Warren E. Weber, 1995. "Some monetary facts," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sum, pages 2-11. [Downloadable!]
  12. Miller, Preston J., 1993. "Optimal income tax in a monetary economy," Journal of Economic Dynamics and Control, Elsevier, vol. 17(3), pages 443-465, May. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. William Whitesell, 2005. "An inflation goal with multiple reference measures," Finance and Economics Discussion Series 2005-62, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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