AbstractThe paper develops a model in which targeting of the nominal interest rate is a reasonable guide for monetary policy. Expected real interest rates and output are exogenous with respect to monetary variables, and the central bank ends up influencing nominal interest rates by altering expected inflation. In this model the monetary authority can come arbitrarily close in each period to its (time-varying) target for the nominal interest rate, even while holding down the forecast variance of the price level. The latter objective pins down the extent of monetary accommodation to shifts in the demand for money and other shocks, and thereby makes determinate the levels of money and prices at each date. Empirical evidence for the United States in the post-World War II period suggests that the model's predictions accord reasonably well with observed behavior for nominal interest rates, growth rates of the monetary base, and rates of inflation. Earlier periods, especially before World War I, provide an interesting contrast because interest-rate smoothing did not apply. The behavior of the monetary base and the price level at these times differed from the post-World War I1 experience in ways predicted by the theory
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2581.
Date of creation: Sep 1989
Date of revision:
Note: EFG ME
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- J. Bradford De Long & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, 1989.
"The Size and Incidence of the Losses from Noise Trading,"
NBER Working Papers
2875, National Bureau of Economic Research, Inc.
- De Long, J Bradford, et al, 1989. " The Size and Incidence of the Losses from Noise Trading," Journal of Finance, American Finance Association, vol. 44(3), pages 681-96, July.
- Robert B. Barsky & N. Gregory Mankiw & Jeffrey A. Miron & David N. Weil, 1989.
"The Worldwide Change in the Behavior of Interest Rates and Prices in 1914,"
NBER Working Papers
2344, National Bureau of Economic Research, Inc.
- Barsky, Robert B. & Mankiw, N. Gregory & Miron, Jeffrey A. & Weill, David N., 1988. "The worldwide change in the behavior of interest rates and prices in 1914," European Economic Review, Elsevier, vol. 32(5), pages 1123-1147, June.
- Carl E. Walsh, 1987.
"The Impact of Monetary Targeting in the United States: 1976-1984,"
NBER Working Papers
2384, National Bureau of Economic Research, Inc.
- Carl E. Walsh, 1987. "The impact of monetary targeting in the United States, 1976-1984," Working Papers in Applied Economic Theory 87-04, Federal Reserve Bank of San Francisco.
- Brian Sack, 1998. "Uncertainty, learning, and gradual monetary policy," Finance and Economics Discussion Series 1998-34, Board of Governors of the Federal Reserve System (U.S.).
- J. Bradford De Long & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, . "The Size and Incidence of Losses from Noise Trading," J. Bradford De Long's Working Papers _128, University of California at Berkeley, Economics Department.
- Nouriel Roubini, 1988. "Offset and Sterilization Under Fixed Exchange Rates With An Optimizing Central Bank," NBER Working Papers 2777, National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.