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Money Growth Targeting

Author

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  • von Hagen, Jürgen

    (Center for European Economic Studies)

Abstract

The recent debate over monetary policy strategies concludes that monetary targeting and inflation targeting in practice lead to very similar patterns of central bank behavior. This raises the question why central banks insist on the strategies they use. In this paper, we develop an answer from political economy. After showing that closed-loop monetary strategies using similar information sets imply similar monetary policy performance, we argue that monetary strategies are helpful in solving internal and external coordination problems for the central bank. We illustrate the point by reviewing the Bundesbank's introduction of monetary targeting in the mid-1970s. Monetary targeting was important for the Bank as a signal that the previous monetary regime had been overcome, as a means to define the role of monetary policy vis-a-vis other players in the macro economic policy game, and to structure the internal monetary policy debate. The last section discusses the implications of this view for the new European Central Bank.

Suggested Citation

  • von Hagen, Jürgen, 1998. "Money Growth Targeting," Seminar Papers 643, Stockholm University, Institute for International Economic Studies.
  • Handle: RePEc:hhs:iiessp:0643
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    References listed on IDEAS

    as
    1. Svensson, Lars E. O., 1997. "Inflation forecast targeting: Implementing and monitoring inflation targets," European Economic Review, Elsevier, vol. 41(6), pages 1111-1146, June.
    2. Süppel, Ralph & von Hagen, Jürgen, 1994. "Central Bank Constitutions for Monetary Unions," CEPR Discussion Papers 919, C.E.P.R. Discussion Papers.
    3. Johannes Groeneveld & Kees Koedijk & Clemens Kool, 1998. "Inflation Dynamics and Monetary Strategies: Evidence from Six Industrialized Countries," Open Economies Review, Springer, vol. 9(1), pages 21-38, January.
    4. von Hagen, Jurgen & Suppel, Ralph, 1994. "Central bank constitutions for federal monetary unions," European Economic Review, Elsevier, vol. 38(3-4), pages 774-782, April.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Lars E. O. Svensson, 1999. "Monetary policy issues for the Eurosystem," Proceedings, Federal Reserve Bank of San Francisco.
    2. Svensson, Lars E. O., 1999. "Inflation targeting as a monetary policy rule," Journal of Monetary Economics, Elsevier, vol. 43(3), pages 607-654, June.
    3. Mandler, Martin, 2011. "Threshold effects in the monetary policy reaction function of the Deutsche Bundesbank," MPRA Paper 32430, University Library of Munich, Germany.
    4. von Hagen, Jürgen & Strauch, Rolf R., 2001. "German public finances: Recent experiences and future challenges," ZEI Working Papers B 13-2001, University of Bonn, ZEI - Center for European Integration Studies.
    5. David Laidler, 2007. "Successes and Failures of Monetary Policy Since the 1950s," University of Western Ontario, Economic Policy Research Institute Working Papers 20072, University of Western Ontario, Economic Policy Research Institute.

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    More about this item

    Keywords

    Monetary growth targeting; Deutsche Bundesbank; European Central Bank; Closed-loop monetary strategies;
    All these keywords.

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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