The Credibility of the Federal Reserve's Monetary Targets
AbstractIn the 1970s the Federal Reserve began a policy of targeting monetary growth. Those who viewed this as a positive development felt that such a policy would allow the Fed to signal its intentions to be firm in its pursuit of an antiinflationary agenda. Moreover, if the Fed could pursue its agenda in a credible manner, the social costs of undertaking such a policy could, presumably, be reduced. In addition, credible monetary growth targets cause the money supply to follow a mean-reverting process. If the money supply and the aggregate price level are strongly related, monetary targets cause the aggregate price level to be mean reverting as well, thereby reducing long-run uncertainty about prices, raising allocative efficiency in capital markets, and increasing economic growth. In this working paper, J. Peter Ferderer explores the history of monetary targeting since the 1970s to determine the extent to which Fed actions have been seen as credible at reducing inflation, and the factors affecting credibility.
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 EconWPA in its series Macroeconomics with number 9903006.
Length: 43 pages
Date of creation: 09 Mar 1999
Date of revision:
Note: Type of Document - Acrobat PDF; prepared on IBM PC; to print on PostScript; pages: 43; figures: included
Contact details of provider:
Web page: http://22.214.171.124
Find related papers by JEL classification:
- E - Macroeconomics and Monetary Economics
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.:
- Rogoff, Kenneth, 1987.
"Reputational constraints on monetary policy,"
Carnegie-Rochester Conference Series on Public Policy,
Elsevier, vol. 26(1), pages 141-181, January.
- Baxter, Marianne, 1985. "The role of expectations in stabilization policy," Journal of Monetary Economics, Elsevier, vol. 15(3), pages 343-362, May.
- Thomas J. Sargent, 1982.
"The Ends of Four Big Inflations,"
in: Inflation: Causes and Effects, pages 41-98
National Bureau of Economic Research, Inc.
- Ben Bernanke & Frederic Mishkin, 1993.
"Central Bank Behavior and the Strategy of Monetary Policy: Observations From Six Industrialized Countries,"
NBER Working Papers
4082, National Bureau of Economic Research, Inc.
- Ben Bernanke & Frederic Mishkin, 1992. "Central Bank Behavior and the Strategy of Monetary Policy: Observations from Six Industrialized Countries," NBER Chapters, in: NBER Macroeconomics Annual 1992, Volume 7, pages 183-238 National Bureau of Economic Research, Inc.
- Ann-Marie Meulendyke, 1988. "A review of Federal Reserve policy targets and operating guides in recent decades," Quarterly Review, Federal Reserve Bank of New York, issue Aut, pages 6-17.
- Olivier J. Blanchard, 1984.
"The Lucas Critique and the Volcker Deflation,"
NBER Working Papers
1326, National Bureau of Economic Research, Inc.
- Walsh, Carl E, 1986. "In Defense of Base Drift," American Economic Review, American Economic Association, vol. 76(4), pages 692-700, September.
- Frankel, Jeffrey A & Hardouvelis, Gikas A, 1985. "Commodity Prices, Money Surprises and Fed Credibility," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 17(4), pages 425-38, November.
- Peter N. Ireland, 1993. "Price stability under long-run monetary targeting," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages 25-46.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).
If references are entirely missing, you can add them using this form.