We study the properties of alternative central bank targeting procedures in a general equilibrium monetary model of the US economy with labour contracts, endogenous velocity and three shocks: money demand, supply and fiscal. Money demand -velocity- shocks emerge as the main sources of macroeconomic volatility. Consequently, nominal interest rate targeting results in greater stability than money targeting. Interestingly this holds independently of the type of the shock (unlike Poole). Interest rate targeting also generates a higher level of welfare.
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- Carlstrom, Charles T. & Fuerst, Timothy S., 1995.
"Interest rate rules vs. money growth rules a welfare comparison in a cash-in-advance economy,"
Journal of Monetary Economics,
Elsevier, vol. 36(2), pages 247-267, November.
- Charles T. Carlstrom & Timothy S. Fuerst, 1995. "Interest rate rules vs. money growth rules: a welfare comparison in a cash-in-advance economy," Working Paper 9504, Federal Reserve Bank of Cleveland.
- Gray, Jo Anna, 1976. "Wage indexation: A macroeconomic approach," Journal of Monetary Economics, Elsevier, vol. 2(2), pages 221-235, April.
- Marvin Goodfriend & David H. Small(), 1993. "Operating procedures and the conduct of monetary policy: conference proceedings," Proceedings, Board of Governors of the Federal Reserve System (U.S.), pages -.
- Canzoneri, Matthew B & Dellas, Harris, 1995.
"Real Interest Rates and Central Bank Operating Procedures,"
CEPR Discussion Papers
1099, C.E.P.R. Discussion Papers.
- Canzoneri, Matthew B. & Dellas, Harris, 1998. "Real interest rates and central bank operating procedures," Journal of Monetary Economics, Elsevier, vol. 42(3), pages 471-494, October.
- Mccallum, Bennet T., 1988. "Robustness properties of a rule for monetary policy," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 29(1), pages 173-203, January.
- Canzoneri, Matthew B & Dellas, Harris, 1996. " Monetary Integration in Europe: Implications for Real Interest Rates and Stock Markets," Scandinavian Journal of Economics, Wiley Blackwell, vol. 98(4), pages 541-547, December.
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