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Poole Revisited

Author

Listed:
  • Collard, Fabrice

    (CEPREMAP-CNRS, Paris)

  • Dellas, Harris

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES); University of Bonn)

  • Ertz, Guy

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

Abstract

We study the properties of alternative central bank targeting procedures in a general equilibrium, monetary model with labor contracts, endogenous velocity and three shocks: money demand, supply and fiscal. Money demand -velocity- shocks emerge as the main source of macroeconomic volatility. Consequently, nominal interest rate targeting results in greater stability than money targeting. Interestingly this holds independent of the type of the shock (unlike Poole). Interest rate targeting also generates a substantially higher level of welfare.

Suggested Citation

  • Collard, Fabrice & Dellas, Harris & Ertz, Guy, 1998. "Poole Revisited," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1998023, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  • Handle: RePEc:ctl:louvir:1998023
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    File URL: http://sites.uclouvain.be/econ/DP/IRES/9823.pdf
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    References listed on IDEAS

    as
    1. 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.
    2. 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.
    3. Gray, Jo Anna, 1976. "Wage indexation: A macroeconomic approach," Journal of Monetary Economics, Elsevier, vol. 2(2), pages 221-235, April.
    4. 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.).
    5. 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.
    6. 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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    Citations

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    Cited by:

    1. Hromcova, Jana, 2003. "Money and growth in a cash-in-advance economy with costly credit," Economic Modelling, Elsevier, vol. 20(6), pages 1113-1136, December.
    2. Jana Hromcová, 2004. "On The Income Velocity Of Money In A Cash-In-Advance Economy With Capital," Working Papers. Serie AD 2004-21, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    3. Jordi Caballé & Jana Hromcová, 2011. "The Role of Central Bank Operating Procedures in an Economy with Productive Government Spending," Computational Economics, Springer;Society for Computational Economics, vol. 37(1), pages 39-65, January.
    4. Woodford Michael, 2002. "Inflation Stabilization and Welfare," The B.E. Journal of Macroeconomics, De Gruyter, vol. 2(1), pages 1-53, February.
    5. Jana Hromcová, 2007. "On Income Velocity of Money, Precautionary Money Demand and Growth," Journal of Economics, Springer, vol. 90(2), pages 143-166, March.
    6. Guy Ertz, 2001. "La contribution du courant des cycles réels à la théorie du cycle économique," Reflets et perspectives de la vie économique, De Boeck Université, vol. 0(1), pages 215-227.
    7. Correani, L. & Di Dio, F. & Patrì, S., 2014. "Optimal choice of fiscal policy instruments in a stochastic IS–LM model," Mathematical Social Sciences, Elsevier, vol. 71(C), pages 30-42.
    8. Sell, Friedrich L. & Kermer, Silvio, 2006. "William Poole in der modernen Makroökonomik: Exegese des ursprünglichen Beitrags und seiner Fortentwicklungen für die offene Volkswirtschaft," Working Papers in Economics 2006,3, Bundeswehr University Munich, Economic Research Group.

    More about this item

    Keywords

    Central Bank; Targeting Procedures; Velocity Shocks; Business Cycles;

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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