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Conducting monetary policy without a nominal anchor

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  • Reinhart, Vincent

Abstract

The analysis of a simple macro model with forward-looking expectations suggests that a monetary authority can operate a stable and determinate gradualist interest rate policy only as long as concern for inflation is teamed with monitoring other indicators, supporting the policy eclecticism of the recent Monetary Policy Report to Congress. In general, an interest rate-smoothing rule cannot be based solely on relative prices or rates of return, including relative commodity prices and the slope of the yield curve, or respond solely to real magnitudes, such as the output gap. Any of these indicator variables, however, complement the use of an inflation target.

Suggested Citation

  • Reinhart, Vincent, 1991. "Conducting monetary policy without a nominal anchor," Journal of Macroeconomics, Elsevier, vol. 13(4), pages 573-596.
  • Handle: RePEc:eee:jmacro:v:13:y:1991:i:4:p:573-596
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    Cited by:

    1. Vincent Reinhart, 2003. "Making monetary policy in an uncertain world," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 265-274.

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