Quantitative Goals for Monetary Policy

Antonio Fat¡s, Ilian Mihov and Andrew Rose
Authors registered in the RePEc Author Service: Antonio Fatas

Journal of Money, Credit and Banking, 2007, vol. 39, issue 5, 1163-1176

Abstract: We study empirically the macroeconomic effects of an explicit "de jure" quantitative goal for monetary policy. Quantitative goals take three forms: exchange rates, money growth rates, and inflation targets. We analyze the effects on inflation of both having a quantitative target and hitting a declared target. Our empirical work uses an annual data set covering 42 countries between 1960 and 2000, and takes account of other determinants of inflation (such as fiscal policy, the business cycle, and openness to international trade) and the endogeneity of the monetary policy regime. We find that both having and hitting quantitative targets for monetary policy is systematically and robustly associated with lower inflation. The exact form of the monetary target matters somewhat (especially for the sustainability of the monetary regime) but is less important than having some quantitative target. Successfully achieving a quantitative monetary goal is also associated with less volatile output. Copyright 2007 The Ohio State University.

Date: 2007
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Related works:
Journal Article: Quantitative Goals for Monetary Policy (2007)
Working Paper: Quantitative goals for monetary policy (2006)
Working Paper: Quantitative Goals for Monetary Policy (2004)
Working Paper: Quantitative Goals for Monetary Policy (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:mcb:jmoncb:v:39:y:2007:i:5:p:1163-1176

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