Working Paper: NBER ID: w1596
Authors: Bennett T. McCallum
Abstract: The purpose of this paper is to review and evaluate the most important existing criticisms of policy strategies that feature adherence to money stock targets. Four main categories of criticism (and counterargumerits) are analyzed. The first of these involves the claim that accurate money stock control is infeasible while the second contends that such control can only be obtained along with extreme volatility of interest rates. The third emphasizes difficulties resulting from technical change and deregulation, and the fourth concerns strategic issues of rules vs. discretion, activist vs. non-activist policy, and the logical function of intermediate targets.
Keywords: No keywords provided
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Methods for controlling the money stock (E52) | Accurate control of the money stock is infeasible (E49) |
| Control of the money stock (E50) | Extreme volatility in short-term interest rates (E43) |
| Technological changes and deregulation (L51) | Complicates the relationship between monetary aggregates and economic outcomes (E19) |
| Adherence to money stock targets (E52) | Less desirable than a flexible approach (C69) |