This paper presents a selective survey of issues relevant to the choice of nominal anchors for monetary policy. Section I reviews long price-level histories for the United Kingdom and United States, which reveal that the price level behaved very differently following WWII in these countries than it had done in previous post-war experiences. In particular following WWII the responsibilities of monetary policy expanded to encompass a business-cycle stabilization role and the nominal anchor shifted from the fixed anchor or price-level stability to the moving anchor of inflation-rate stability. The remaining sections of the paper review, in the context of a variety of models, some of the considerations that are relevant to setting the average inflation rate in countries without a fixed nominal anchor.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
4850.
Length: Date of creation: Sep 1994 Date of revision: Handle: RePEc:nbr:nberwo:4850
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Find related papers by JEL classification: F30 - International Economics - - International Finance - - - General E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
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