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Some Thoughts on Monetary Targeting vs. Inflation Targeting

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Author Info
Karen Cabos ()
Michael Funke ()
Nikolaus A. Siegfried ()

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Abstract

We offer some empirical evidence on the likely scale of control and indicator problems surrounding alternative monetary targets and a direct inflation target. The links between monetary policy actions and inflationare estimated in dynamic linear models using the Kalman filter. We compare alternative intermediate-target and final-target monetary strategies using German data from the end of the Bretton-Woods system until 1997. The estimation results show that broad money dominates narrow money as an intermediate target, while control problems involved in targeting broad money are larger than for direct inflation targets.

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Publisher Info
Paper provided by Hamburg University, Department of Economics in its series Quantitative Macroeconomics Working Papers with number 19912.

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Length: 21 pages
Date of creation: 28 Oct 1999
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Handle: RePEc:ham:qmwops:19912

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Related research
Keywords: Monetary Policy; Time-Varying Parameter Models; Inflation Targeting;

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Find related papers by JEL classification:
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Other Model Applications

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. Richard Clarida & Jordi Gali & Mark Gertler, 1997. "Monetary Policy Rules in Practice: Some International Evidence," NBER Working Papers 6254, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Cukierman, A., 1996. "Targeting Monetary Aggregates and Inflation in Europe," Papers 37-96, Tel Aviv.
    Other versions:
  3. Richard Clarida & Mark Gertler, 1996. "How the Bundesbank Conducts Monetary Policy," NBER Working Papers 5581, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Loungani, Prakash & Rush, Mark, 1995. "The Effect of Changes in Reserve Requirements on Investment and GNP," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(2), pages 511-26, May. [Downloadable!] (restricted)
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  5. Svensson, Lars E. O., 1997. "Inflation forecast targeting: Implementing and monitoring inflation targets," European Economic Review, Elsevier, vol. 41(6), pages 1111-1146, June. [Downloadable!] (restricted)
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  6. Francis X. Diebold & Robert S. Mariano, 1994. "Comparing Predictive Accuracy," NBER Technical Working Papers 0169, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Kirstin Hubrich, 1999. "Estimation of a German money demand system - a long-run analysis," Empirical Economics, Springer, vol. 24(1), pages 77-99. [Downloadable!] (restricted)
  8. Frederic S. Mishkin & Adam S. Posen, 1997. "Inflation targeting: lessons from four countries," Economic Policy Review, Federal Reserve Bank of New York, issue Aug, pages 9-110. [Downloadable!]
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  9. Michael J. Dueker, 1995. "Narrow vs. broad measures of money as intermediate targets: some forecast results," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 41-51. [Downloadable!]
  10. Linda S. Kole & Ellen E. Meade, 1995. "German monetary targeting: a retrospective view," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Oct, pages 917-931.
  11. Bernanke, Ben S. & Mihov, Ilian, 1997. "What does the Bundesbank target?," European Economic Review, Elsevier, vol. 41(6), pages 1025-1053, June. [Downloadable!] (restricted)
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Cited by:
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  1. Kirstin Hubrich & Peter J. G. Vlaar, 2000. "Germany and the Euro Area: Differences in the Transmission Process of Monetary Policy," Econometric Society World Congress 2000 Contributed Papers 1802, Econometric Society, revised 08 Nov 2000. [Downloadable!]
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  2. Karen Cabos & Nikolaus A. Siegfried, 2001. "Controlling Inflation in Euroland," Quantitative Macroeconomics Working Papers 20102, Hamburg University, Department of Economics. [Downloadable!]
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