Issues Concerning Nominal Anchors for Monetary Policy

Robert Flood () and Michael Mussa

No 4850, NBER Working Papers from National Bureau of Economic Research, Inc

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, in the context of a variety of models, some of the considerations that are relevant to setting the average inflation rate in countries without a fixed nominal anchor.

JEL-codes: E42 F30 (search for similar items in EconPapers)
Date: 1994-09
Note: IFM ME
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Citations: View citations in EconPapers (17)

Published as Balino, Thomas J. and Carlo Cottarelli (eds.) Frameworks for Monetary Stability: Policy Issues and Country Experiences. International Monetary Fund, 1994.

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