A Price Target for U.S. Monetary Policy? Lessons from the Experience with Money Growth Targets
The cutting edge of recent efforts to reshape monetary policy in many countries has been to impose a price target on the central bank. This paper examines such a policy in light of the Federal Reserve System's experience with money targeting from the late 1970s through the mid 1980s. The empirical analysis documents the Federal Reserve's initial use and subsequent disregard of money growth targets, and shows that abandoning these targets was a sensible response to the changing mix of shocks affecting the U.S. economy -- specifically, an increase in the relative volatility of money demand shocks. This experience provides little ground for confidence that a price target would be optimal for U.S. monetary policy. Even if the structure of the relevant shocks at any particular time were to appear favorable, a policy based on a price target would likewise be undermined if the relative volatility of aggregate supply shocks increased.
(This abstract was borrowed from another version of this item.)
Volume (Year): 27 (1996)
Issue (Month): 1 ()
|Contact details of provider:|| Postal: |
Phone: (202) 797-6000
Fax: (202) 797-6004
Web page: http://www.brookings.edu/economics.aspx
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:bin:bpeajo:v:27:y:1996:i:1996-1:p:77-146. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jennifer Ambrosino)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.