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Working Paper
A price target for U.S. monetary policy? Lessons from the experience with money growth targets
The cutting edge of recent efforts to reshape monetary policy in many countries has been to impose a price target on the central bank. This paper examines such a policy in light of the Federal Reserve System's experience with money targeting from the late 1970s through the mid 1980s. The empirical analysis documents the Federal Reserve's initial use and subsequent disregard of money growth targets, and shows that abandoning these targets was a sensible response to the changing mix of shocks affecting the U.S. economy -- specifically, an increase in the relative volatility of money demand ...
Journal Article
Inflation and the growth rate of money
Report
Does talk matter after all? Inflation targeting and central bank behavior
Interpretations of inflation targeting (IT) have ranged widely, from ?inflation-only targeting? without regard for output, to cheap talk without effect, to transparency increasing flexibility without cost. We characterize five interpretations of the adoption if IT as shifts between strategies in a conventional model of monetary time-inconsistency. Their implications for central bank behavior are compared to the time-series properties of inflation, and the response of interest rates to inflation movements, for three countries adopting it in the early 1990s. ; There is no evidence that IT ...
Working Paper
Can VAR's describe monetary policy?
Recent research has questioned the usefulness of Vector Autoregression (VAR) models as a description of monetary policy, especially in light of the low correlation between forecast errors from VARs and those derived from Fed funds futures rates. This paper presents three findings on VARs' ability to describe monetary policy. First, the correlation between forecasts errors is a misleading measure of how closely the VAR forecast mimics the futures market's. In particular, the low correlation is partly due to a week positive correlation between the VAR forecasts and the futures market errors. ...
Working Paper
Using noisy indicators to measure potential output
Working Paper
Another look at the evidence on money-income casualty