The formulation of monetary policy
AbstractThe purpose of this paper is to elucidate the way in which current institutional arrangements shape the character of monetary policy. It is emphasized that the Fed, in order to preserve its independence, formulates monetary policy in a way that prevents the formation of coalitions within the government that could threaten its independence. As a consequence, the Fed, in general, attempts to balance multiple, changing objectives. This attempt leads to the demand for "flexibility," an absence of precommitment. Much of the paper is devoted to a discussion of the way in which the Fed's desire to avoid precommitment influences its use of analytical procedures for formulating policy and its use of money supply targets.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Richmond in its series Working Paper with number 84-02.
Date of creation: 1984
Date of revision:
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- Mayer, Thomas, 1982. "A case study of Federal Reserve policymaking : Regulation Q in 1966," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 259-271.
- Lombra, Raymond & Moran, Michael, 1980. "Policy advice and policymaking at the federal reserve," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 13(1), pages 9-68, January.
- Michael Dotsey, 1985. "Monetary policy, secrecy, and federal funds rate behavior," Working Paper 85-04, Federal Reserve Bank of Richmond.
- Robert J. Barro, 1986. "Rules versus Discretion," NBER Working Papers 1473, National Bureau of Economic Research, Inc.
- Robert L. Hetzel, 1984. "Monetary policy in the early 1980's," Working Paper 84-01, Federal Reserve Bank of Richmond.
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