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Should The Fed Smooth Interest Rates? The Case of Seasonal Monetary Policy

N. Gregory Mankiw () and Jeffrey Miron ()

No 3388, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper examines the choice of monetary policy in response to seasonal fluctuations in the economy. It discusses the costs and benefits of smoothing interest rates over the seasons, which has been the Fed's policy since its founding in 1914, and presents simulations suggesting how the economy would behave under the alternative policy of stabilizing the money stock. Finally, it presents evidence that the smoothing of interest rates in 1914 changed the seasonal business cycle.

Date: 1990-06
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Published as Carnegie-Rochester Conference Series on Public Policy, Vol. 34, pp. 41-69,(Spring 1991).

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