The Futures of Monetary Stabilization Policy

15 Pages Posted: 2 Oct 2014 Last revised: 20 Nov 2014

See all articles by Robert Cavender

Robert Cavender

Gettysburg College - Department of Economics

Date Written: November 19, 2014

Abstract

In deciding monetary policy, the Federal Reserve of the United States faces two major sets of problems, namely, those having to do with precision and those having to do with time-inconsistency. Sumner offers what he believes to be a solution to both the precision and the time-inconsistency problems in the form of a CPI futures market created and run by the Fed. Garrison and White disagree, countering that this would in fact be a non-solution. The purpose of this paper is to suggest an alternative to Sumner's proposal that avoids the issues outlined by Garrison and White that ultimately allows the Fed to solve both sets of problems as Sumner originally intended.

Keywords: Monetary Policy, Futures Markets

JEL Classification: E50, G13

Suggested Citation

Cavender, Robert, The Futures of Monetary Stabilization Policy (November 19, 2014). Available at SSRN: https://ssrn.com/abstract=2503740 or http://dx.doi.org/10.2139/ssrn.2503740

Robert Cavender (Contact Author)

Gettysburg College - Department of Economics ( email )

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