Issues Concerning Nominal Anchors for Monetary Policy

Michael Mussa and Robert Flood

No 1994/061, IMF Working Papers from International Monetary Fund

Abstract: This paper presents a selective survey of issues relevant to the choice of nominal anchors for monetary policy. Section I reviews long price-level histories for the United Kingdom and United States, which reveal that the price level behaved very differently following WWII in these countries than it had done in previous post-war experiences. In particular following WWII the responsibilities of monetary policy expanded to encompass a business- cycle stabilization role and the nominal anchor shifted from the fixed anchor or price-level stability to the moving anchor of inflation-rate stability. The remaining sections of the paper review some of the considerations that are relevant to setting the average inflation rate in countries without a fixed nominal anchor.

Keywords: WP; inflation rate; price level; monetary policy; rate of inflation; United States price level; paper money; price-level result; inflation standard; economic system; Inflation; Nominal anchors; Conventional peg; Exchange rate arrangements; Exchange rates (search for similar items in EconPapers)
Pages: 41
Date: 1994-05-01
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Citations: View citations in EconPapers (17)

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