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Can Monetary Stabilization Policy Be Improved by CPI Futures Targeting? A Comment

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  • Garrison, Roger W
  • White, Lawrence H

Abstract

Scott Sumner (and similarly Kevin Dowd) proposes to have the central bank write futures contracts on the Consumer Price Index, and automatically adjust the money stock in response to the public's net position in such contracts, as a way of improving the precision and credibility of monetary policy. The authors identify two serious problems that can be expected to render Sumner's proposal ineffective: (1) the public has no incentive to take a speculative position in the contracts until it is too late to adjust the money stock and (2) the central bank lacks an effective budget constraint. Copyright 1997 by Ohio State University Press.

Suggested Citation

  • Garrison, Roger W & White, Lawrence H, 1997. "Can Monetary Stabilization Policy Be Improved by CPI Futures Targeting? A Comment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(4), pages 535-541, November.
    • Handle: RePEc:mcb:jmoncb:v:29:y:1997:i:4:p:535-41
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    Cited by:

    1. Sumner Scott, 2006. "Let a Thousand Models Bloom: The Advantages of Making the FOMC a Truly 'Open Market'," The B.E. Journal of Macroeconomics, De Gruyter, vol. 6(1), pages 1-27, October.
    2. George M. von Furstenberg & Michael T. Gapen, 1998. "Conditional Indexation Bias in Yields Reported on Inflation-Indexed Securities with Special Reference to UDIBONOS and TIPS," Economía Mexicana NUEVA ÉPOCA, CIDE, División de Economía, vol. 0(2), pages 149-188, July-Dece.
    3. Sumner, Scott, 2015. "Nominal GDP futures targeting," Journal of Financial Stability, Elsevier, vol. 17(C), pages 65-75.
    4. J. S. Ferris & J. A. Galbraith, 2003. "Indirect convertibility as a money rule for inflation targeting," Applied Financial Economics, Taylor & Francis Journals, vol. 13(10), pages 753-761.
    5. Sumner, Scott, 2017. "Monetary policy rules in light of the great recession," Journal of Macroeconomics, Elsevier, vol. 54(PA), pages 90-99.
    6. Alexander Salter, 2014. "Is there a self-enforcing monetary constitution?," Constitutional Political Economy, Springer, vol. 25(3), pages 280-300, September.

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