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Allan Meltzer’s Model of the Transmission Mechanism and Its Implications for Today

Peter Ireland ()

No 938, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: Allan Meltzer developed his model of the monetary transmission mechanism in research conducted with Karl Brunner. The Brunner-Meltzer model implies that the Federal Reserve would benefit from drawing brighter lines between monetary and fiscal policy actions, eschewing credit market intervention and focusing, instead, on using its control over the monetary base to stabilize the aggregate price level. The model downplays the importance of the zero lower interest rate bound and suggests a greater role for monetary aggregates in the Fed’s policymaking strategy. Finally, it highlights the benefits that accrue when policy is conducted according to a rule rather than discretion.

Keywords: Allan Meltzer; Karl Brunner; Monetarism; Monetary Transmission Mechanism (search for similar items in EconPapers)
JEL-codes: B31 E52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-mon
Date: 2017-11-15
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