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.
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- Carlstrom, Charles T. & Fuerst, Timothy S., 1995.
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Journal of Monetary Economics,
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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.
- 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 541-47, December.
- 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.).
- Gray, Jo Anna, 1976. "Wage indexation: A macroeconomic approach," Journal of Monetary Economics, Elsevier, vol. 2(2), pages 221-235, April.
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