On the optimal choice of a monetary policy instrument
By: Andrew Atkeson, V. V. Chari, Patrick J. Kehoe.
Contributors: Chari, V. V.; Kehoe, Patrick J.; National Bureau of Economic Research.
Series: NBER working paper series -- no. 13398.; Working paper series (National Bureau of Economic Research) -- working paper no. 13398.
Publisher: National Bureau of Economic Research
Published: 2007
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 32
Subjects: Monetary policy -- Evaluation
Description: The optimal choice of a monetary policy instrument depends on how tight and transparent the available instruments are and on whether policymakers can commit to future policies. Tightness is always desirable; transparency is only if policymakers cannot commit. Interest rates, which can be made endogenously tight, have a natural advantage over money growth and exchange rates, which cannot. As prices, interest and exchange rates are more transparent than money growth. All else equal, the best instrument is interest rates and the next-best, exchange rates. These findings are consistent with the observed instrument choices of developed and less-developed economies.
Notes: "September 2007"

Includes bibliographical references (p. 31-32).

Also available in PDF from the NBER world wide web site (www.nber.org).