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Controlling the Price Level

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Robert E. Hall

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Abstract

Governments determine the size of the unit of value just as they determine the length of the length and weight of physical units of measure. What are the different ways that a government can control the size of the unit of value, that is, control the price level? In general, the government designates a resource gold, paper currency, another country's currency and defines its unit of value as a particular amount of that resource. An interesting variant proposed by Irving Fisher in 1913 and implemented more recently in Chile is to alter the resource content of the unit to stabilize the price level. Another idea is to alter the interest rate paid on reserves in a way that stabilizes the price level.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6914.

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Date of creation: Jan 1999
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Handle: RePEc:nbr:nberwo:6914

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Find related papers by JEL classification:
E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Thomas J. Sargent & Neil Wallace, 1981. "Some unpleasant monetarist arithmetic," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall. [Downloadable!]
  2. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December. [Downloadable!] (restricted)
  3. Woodford, Michael, 1994. "Monetary Policy and Price Level Determinacy in a Cash-in-Advance Economy," Economic Theory, Springer, vol. 4(3), pages 345-80.
  4. James Tobin, 1998. "Monetary Policy: Recent Theory and Practice," Cowles Foundation Discussion Papers 1187, Cowles Foundation, Yale University. [Downloadable!]
  5. Don Patinkin, 1993. "Irving Fisher and his compensated dollar plan," Economic Quarterly, Federal Reserve Bank of Richmond, issue Sum, pages 1-34. [Downloadable!]
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Willem H. Buiter, 2004. "The Elusive Welfare Economics of Price Stability as a Monetary Policy Objective: Should New Keynesian Central Bankers Pursue Price Stability?," NBER Working Papers 10848, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Larry E. Jones & Rodolfo E. Manuelli & Ennio Stacchetti, 2000. "Technology (and policy) shocks in models of endogenous growth," Staff Report 281, Federal Reserve Bank of Minneapolis. [Downloadable!]
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  3. Michael Woodford, 2002. "Financial market efficiency and the effectiveness of monetary policy," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 85-94. [Downloadable!]
  4. Willem H. Buiter, 2006. "The elusive welfare economics of price stability as a monetary policy objective - why New Keynesian central bankers should validate core inflation," Working Paper Series 609, European Central Bank. [Downloadable!]
  5. Mark G. Guzman, 2004. "The impact of paying interest on reserves in the presence of government deficit financing," Working Papers 04-06, Federal Reserve Bank of Dallas. [Downloadable!]
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