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Eurosystem Monetary Targeting: Lessons from U.S. Data

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  • Rudebusch, Glenn

    ()
    (Federal Reserve Bank of San Fransisco)

  • Svensson, Lars

    ()
    (Institute for International Economic Studies, Stockholm University)

Abstract

Using a small empirical model of inflation, output, and money estimated on U.S: 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 deterministic money demand formulation. In this framework, there is thus no support for the prominent role given to money growth in the Eurosystem's monetary policy strategy.

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Bibliographic Info

Paper provided by Stockholm University, Institute for International Economic Studies in its series Seminar Papers with number 672.

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Length: 35 pages
Date of creation: 01 Jun 1999
Date of revision:
Handle: RePEc:hhs:iiessp:0672

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Postal: Institute for International Economic Studies, Stockholm University, S-106 91 Stockholm, Sweden
Phone: +46-8-162000
Fax: +46-8-161443
Web page: http://www.iies.su.se/
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Keywords: inflation targeting; monetary targeting; ECB;

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  2. Svensson, Lars E. O., 1999. "Monetary policy issues for the Eurosystem," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 51(1), pages 79-136, December.
  3. Gunter Coenen & Volker Wieland, 2000. "A Small Estimated Euro-Area Model with Rational Expectations and Nominal Rigidities," Econometric Society World Congress 2000 Contributed Papers 1284, Econometric Society.
  4. Svensson, L.E.O., 1998. "Inflation Targeting as a Monetary Policy Rule," Papers 646, Stockholm - International Economic Studies.
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