A Mandate for Price Stability
9 Pages Posted: 3 Nov 2012
Date Written: 1990
This paper argues for passage of the Neal Resolution, which would make price level stability the dominant goal of monetary policy. The alternative to a rule that mandates price stability is the exercise of ongoing discretion over the desired price level. This discretion, it is argued, encourages groups that benefit from high and variable inflation to lobby the political system. A rule is desirable primarily because it limits the incentives for special-interest politics.
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