Money Growth Targeting

Juergen von Hagen

No 643, Seminar Papers from Stockholm University, Institute for International Economic Studies

Abstract: The recent debate over monetary policy strategies concludes that monetary targeting and inflation targeting in practice lead to very similar patterns of central bank behavior. This raises the question why central banks insist on the strategies they use. In this paper, we develop an answer from political economy. After showing that closed-loop monetary strategies using similar information sets imply similar monetary policy performance, we argue that monetary strategies are helpful in solving internal and external coordination problems for the central bank. We illustrate the point by reviewing the Bundesbank's introduction of monetary targeting in the mid-1970s. Monetary targeting was important for the Bank as a signal that the previous monetary regime had been overcome, as a means to define the role of monetary policy vis-a-vis other players in the macro economic policy game, and to structure the internal monetary policy debate. The last section discusses the implications of this view for the new European Central Bank.

Keywords: Monetary growth targeting; Deutsche Bundesbank; European Central Bank; Closed-loop monetary strategies (search for similar items in EconPapers)
JEL-codes: E50 E52 (search for similar items in EconPapers)
Pages: 42 pages
Date: 1998-07-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Working Paper: Money Growth Targeting (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iiessp:0643

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