The monetary instrument matters
By: by William T. Gavin, Benjamin D. Keen, and Michael R. Pakko.
Contributors: Keen, Benjamin D.; Pakko, Michael R.
Series: Working paper ;; 2004-026A; Working paper (Federal Reserve Bank of St. Louis : Online) ;; 2004-026A.
Publisher: Federal Reserve Bank of St. Louis
Published: 2004
Place of publication: [St. Louis, Mo.]
Language: eng
Format: Electronic resource
Subjects: Monetary policy.; Interest rates.
Description: "This paper revisits the issue of money growth versus the interest rate as the instrument of monetary policy.  Using a dynamic stochastic general equilibrium framework, we examine the effects of alternative monetary policy rules on inflation persistence, the information content of monetary data, and real variables.  We show that inflation persistence and the variability of inflation relative to money growth depends on whether the central bank follows a money growth rule or an interest rate rule.  With a money growth rule, inflation is not persistent and the price level is much more volatile than the money supply.  Those counterfactual implications are eliminated by the use of interest rate rules whether prices are sticky or not.  A central bank's utilization of interest rate rules, however, obscures the information content of monetary aggregates and also leads to subtle problems for econometricians trying to estimate money demand functions or to identify shocks to the trend and cycle components of the money stock"--Federal Reserve Bank of St. Louis web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 11/12/2004.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.