Abstract

http://ssrn.com/abstract=1021980
 
 

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Two Reasons Why Money and Credit May Be Useful in Monetary Policy


Lawrence J. Christiano


Northwestern University; Federal Reserve Bank of Cleveland; Federal Reserve Bank of Chicago; Federal Reserve Bank of Minneapolis; National Bureau of Economic Research (NBER)

Roberto Motto


European Central Bank (ECB)

Massimo Rostagno


European Central Bank (ECB)

October 2007

NBER Working Paper No. w13502

Abstract:     
We describe two examples which illustrate in different ways how money and credit may be useful in the conduct of monetary policy. Our first example shows how monitoring money and credit can help anchor private sector expectations about inflation. Our second example shows that a monetary policy that focuses too narrowly on inflation may inadvertently contribute to welfare-reducing boom-bust cycles in real and financial variables. The example is of some interest because it is based on a monetary policy rule fit to aggregate data. We show that a policy of monetary tightening when credit growth is strong can mitigate the problems identified in our second example.

Number of Pages in PDF File: 43

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Date posted: October 16, 2007  

Suggested Citation

Christiano, Lawrence J. and Motto, Roberto and Rostagno, Massimo, Two Reasons Why Money and Credit May Be Useful in Monetary Policy (October 2007). NBER Working Paper No. w13502. Available at SSRN: http://ssrn.com/abstract=1021980

Contact Information

Lawrence J. Christiano (Contact Author)
Northwestern University ( email )
2003 Sheridan Road
Evanston, IL 60208
United States
847-491-8231 (Phone)
847-491-7001 (Fax)
Federal Reserve Bank of Cleveland
East 6th & Superior
Cleveland, OH 44101-1387
United States
Federal Reserve Bank of Chicago
230 South LaSalle Street
Chicago, IL 60604
United States
Federal Reserve Bank of Minneapolis
90 Hennepin Avenue
Minneapolis, MN 55480
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Roberto Motto
European Central Bank (ECB) ( email )
Kaiserstrasse 29
Postfach 16 03 19
D-60311 Frankfurt am Main
Germany
Massimo Rostagno
European Central Bank (ECB) ( email )
Kaiserstrasse 29
Postfach 16 03 19
D-60311 Frankfurt am Main
Germany
+49 69 1344 7663 (Phone)
+49 69 1344 7604 (Fax)
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