Targets, Indicators, and Instruments of Monetary Policy

40 Pages Posted: 15 Feb 2006

See all articles by Bennett T. McCallum

Bennett T. McCallum

Carnegie Mellon University - David A. Tepper School of Business; National Bureau of Economic Research (NBER)

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Date Written: April 1990

Abstract

This paper seeks to advance the discussion of monetary policy strategies in several ways. One involves a comparison of targets for nominal GNP and the price level, with emphasis on specificational robustness and implications for output variability. A second pertains to various "indicator" variables recently suggested by Federal Reserve officials. In this regard, a careful review of the relevant conceptual distinctions--concerning instruments, targets, indicators, etc.--is required. Finally, the proposal that strategy should be conducted so as to place minimal reliance on quantity variables is given attention, in the context of evidence concerning the merits of an interest rate instrument.

JEL Classification: 3116

Suggested Citation

McCallum, Bennett T., Targets, Indicators, and Instruments of Monetary Policy (April 1990). IMF Working Paper No. 90/41, Available at SSRN: https://ssrn.com/abstract=884766

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