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Money Growth Targeting

Author

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  • von Hagen, Jürgen

    () (Center for European Economic Studies)

Abstract

The recent debate over monetary policy strategies concludes that monetary targeting and inflation targeting in practice lead to very similar patterns of central bank behavior. This raises the question why central banks insist on the strategies they use. In this paper, we develop an answer from political economy. After showing that closed-loop monetary strategies using similar information sets imply similar monetary policy performance, we argue that monetary strategies are helpful in solving internal and external coordination problems for the central bank. We illustrate the point by reviewing the Bundesbank's introduction of monetary targeting in the mid-1970s. Monetary targeting was important for the Bank as a signal that the previous monetary regime had been overcome, as a means to define the role of monetary policy vis-a-vis other players in the macro economic policy game, and to structure the internal monetary policy debate. The last section discusses the implications of this view for the new European Central Bank.

Suggested Citation

  • von Hagen, Jürgen, 1998. "Money Growth Targeting," Seminar Papers 643, Stockholm University, Institute for International Economic Studies.
  • Handle: RePEc:hhs:iiessp:0643
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    Cited by:

    1. Lars E. O. Svensson, 1999. "Monetary policy issues for the Eurosystem," Proceedings, Federal Reserve Bank of San Francisco.
    2. Svensson, Lars E. O., 1999. "Inflation targeting as a monetary policy rule," Journal of Monetary Economics, Elsevier, vol. 43(3), pages 607-654, June.

    More about this item

    Keywords

    Monetary growth targeting; Deutsche Bundesbank; European Central Bank; Closed-loop monetary strategies;

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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