The Rise and Fall of Money Growth Targets as Guidelines for U.S. Monetary Policy

Benjamin M. Friedman

No 5465, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: A familiar question raised by the Federal Reserve System's evolving use of money growth targets over the past twenty years is whether monetary policymakers had sound economic reasons for changing their procedures as they did -- either in adopting money growth targets in the first place, or in subsequently abandoning them, or in both instances. This paper addresses that question by comparing two kinds of evidence based on U.S. time-series data: first, evidence bearing on what Federal Reserve policymakers should have known about the relationship of money to income and prices, and when they should have known it; and second, evidence showing how and when the Federal Reserve changed its actual (as opposed to stated) reliance on money growth targets. The main conclusion from this comparison is that whatever economic conditions might have warranted reliance on money growth targets in the 1970s and early 1980s had long disappeared by the 1990s, so that abandoning these targets was an appropriate response to changing circumstances. Whether adopting money growth targets earlier on was likewise appropriate is less clear.

JEL-codes: E5 (search for similar items in EconPapers)
Date: 1996-02
Note: ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

Published as “The Rise and Fall of Money Growth Targets as Guidelines for U.S. Monetary Policy.” Kuroda (ed.), Toward More Effective Monetary Policy. London: Macmillan, 1996.

Downloads: (external link)
http://www.nber.org/papers/w5465.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:5465

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w5465

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().