Money Stock Targeting, Base Drift and Price-Level Predictability: Lessons From the U.K. Experience
AbstractIt is controversial whether money stock targeting without base drift (i.e. following a trend-stationary growth path) makes the price level more predictable in the presence of permanent shocks to money demand. Developing a procedure that does not run into the Lucas critique, and applying this procedure to the case of the U.K., the paper finds that the variance of the trend inflation rate in the U.K. would have been reduced by more than one half if the Bank of England had not allowed base drift.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2825.
Date of creation: Jan 1989
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Publication status: published as Journal of Monetary Economics, Vol. 25, No. 21, pp. 253-272, (March 1990).
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- Bordo, Michael D. & Choudhri, Ehsan U. & Schwartz, Anna J., 1990. "Money stock targeting, base drift, and price-level predictability : Lessons from the U.K. Experience," Journal of Monetary Economics, Elsevier, vol. 25(2), pages 253-272, March.
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