Money Aggregates and Determinacy: A Reinterpretation of Monetary Policy During the Great Inflation

Irfan Qureshi

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: Should a policy rule include money? Including money exerts policy inertia and increases inflation aversion. In a New-Keynesian model with trend inflation,these features guarantee price determinacy even when the Taylor principle is not satisfied. Novel Greenbook data confirm money aggregates as U.S.Federal Open Market Committee policy objectives, enabling monetary policy to insulate the U.S.economy from self-fulfilling fluctuations despite positive trend inflation. A high response to inflation and lowtrend inflation guarantees determinacy post-1982. Cross-country applications highlight the superiority of the rule with money. Raising the inflation target from 2 percent to 4 percent violates the Taylor principle ; including money resolves this issue

Keywords: Determinacy; Great Inflation; Inflation Target; Money Aggregates; Time-Varying Policy (search for similar items in EconPapers)
JEL-codes: E41 E42 E51 E52 E58 E61 E65 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://warwick.ac.uk/fac/soc/economics/research/w ... erp_1156_qureshi.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:1156

Access Statistics for this paper

More papers in The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Margaret Nash ().