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Eurosystem Monetary Targeting: Lessons from US Data

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Author Info
Rudebusch, Glenn D
Svensson, Lars E O

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Abstract

Using a small empirical model of inflation, output, and money estimated on US data, we compare the relative performance of monetary targeting and inflation targeting. The results show that monetary targeting would be quite inefficient, with both higher inflation and output variability. This is true even with a nonstochastic money demand formulation. Our results are also robust to using a P* model of inflation. Therefore, in these popular frameworks, there is no support for the prominent role given to money growth in the Eurosystem's monetary policy strategy.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2522.

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Date of creation: Aug 2000
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Handle: RePEc:cpr:ceprdp:2522

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Related research
Keywords: ECB; Inflation Targeting; Monetary Targeting;

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Find related papers by JEL classification:
E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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