M2 and Monetary Policy
FRB Richmond Economic Review, Vol. 75, No. 5, September/October 1989, pp. 14-29
16 Pages Posted: 2 Nov 2012
Date Written: 1989
Consistent with its mandate in the Humphrey-Hawkins Act of 1978, the Federal Reserve System each year sets a calendar-year target for the monetary aggregate M2. This paper examines the effect of specifying the M2 target as a multiyear trend line and concludes that an operationally significant target for M2 in the form of a trend line that rises at three percent per year will eliminate inflation.
Suggested Citation: Suggested Citation