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The Impact of Futures Price Targeting on the Precision and Credibility of Monetary Policy

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  • Sumner, Scott

Abstract

This paper analyzes the hypothesis that the targeting of macroeconomic aggregates can be done more effectively by pegging the price of a futures contract linked to future announcements of the policy target. Where there is an information lag, futures price targeting may be more efficient than a contingent money supply rule. A policy of futures price targeting would be less likely to suffer from the time inconsistency problem. The use of futures price targeting would also appear to be superior to policies based on intermediate targeting as well as most types of discretion. Copyright 1995 by Ohio State University Press.

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  • Sumner, Scott, 1995. "The Impact of Futures Price Targeting on the Precision and Credibility of Monetary Policy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(1), pages 89-106, February.
  • Handle: RePEc:mcb:jmoncb:v:27:y:1995:i:1:p:89-106
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    Cited by:

    1. J. S. Ferris & J. A. Galbraith, 2003. "Indirect convertibility as a money rule for inflation targeting," Applied Financial Economics, Taylor & Francis Journals, vol. 13(10), pages 753-761.
    2. Ben S. Bernanke & Michael Woodford, 1997. "Inflation forecasts and monetary policy," Proceedings, Federal Reserve Bank of Cleveland, pages 653-686.
    3. Michael Woodford, 1998. "Doing Without Money: Controlling Inflation in a Post-Monetary World," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 173-219, January.
    4. Lioui, Abraham & Poncet, Patrice, 2003. "Dynamic asset pricing with non-redundant forwards," Journal of Economic Dynamics and Control, Elsevier, vol. 27(7), pages 1163-1180, May.
    5. Alexander William Salter, 2016. "Robust Political Economy and the Lender of Last Resort," Journal of Financial Services Research, Springer;Western Finance Association, vol. 50(1), pages 1-27, August.
    6. Colin Rogers & Thomas K. Rymes, 1998. "Indirect Convertibility and Quasi-Futures Contracts: Two Non-Operational Schemes for Automatic Stabilisation of the Price Level?," School of Economics Working Papers 1998-17, University of Adelaide, School of Economics.
    7. Alexander William Salter & Andrew T. Young, 2015. "Would a Free Banking System Target NGDP Growth?," Working Papers 15-08, Department of Economics, West Virginia University.
    8. Dai, Meixing, 1998. "Les effets stabilisants de la zone-cible du taux d’inflation
      [The stabilising effects of inflation-targeting zone]
      ," MPRA Paper 13856, University Library of Munich, Germany, revised Nov 2001.
    9. Scott Sumner, 1992. "Index Future Convertibility: Reply to Woolsey," Cato Journal, Cato Journal, Cato Institute, vol. 12(2), pages 487-492, Fall.

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