Search Results
Journal Article
Should central banks raise their inflation targets? Some relevant issues
Several arguments are relevant. (1) In the absence of the zero lower bound (ZLB), the optimal steady-state inflation rate, according to standard reasoning, lies between deflation at the steady-state real interest rate and the Calvo-model value of zero, with calibration indicating a larger weight on the latter. (2) An attractive modification of the Calvo equation would imply that the weight on the second of these should be zero. (3) There may be some scope for monetary policy to be effective even at the ZLB. (4) Elimination of currency is feasible and would remove the ZLB constraint. (5) ...
Journal Article
Recent developments in the analysis of monetary policy rules
After a brief review of key developments in application of monetary theory to policy analysis, Bennett T. McCallum describes the central aspects of the typical framework used to analyze monetary policy rules. He reviews the methods used to study the effects of policy behavior and provides an example of how two rules (the McCallum rule and the Taylor rule) can be used to investigate recent monetary policy in Japan. His example shows why it may be important for central banks to develop monetary policy procedures based on monetary-aggregate as well as interest-rate instruments.
Conference Paper
Theoretical analysis regarding a zero lower bound on nominal interest rates
This paper explores several issues concerning a possible zero lower bound (ZLB) including its theoretical rationale; the magnitude of effects of low sustained inflation on real interest rates; the validity of analyzing monetary policy in models with no monetary variables; and the dynamic stabilizing properties of Taylor rules in a ZLB context. The most important argument, however, is that if the short nominal rate is immobilized at zero, there nevertheless exists a route for monetary stabilization policy to be effective--via the foreign exchange market. Its quantitative importance is examined ...
Conference Paper
How can monetary policy be improved?
Working Paper
Money and inflation: some critical issues
We consider what, if any, relationship there is between monetary aggregates and inflation, and whether there is any substantial reason for modifying the current mainstream mode of policy analysis, which frequently does not consider monetary aggregates at all. We begin by considering the body of thought known as the "quantity theory of money." The quantity theory centers on the prediction that there will be a long-run proportionate reaction of the price level to an exogenous increase in the nominal money stock. The nominal homogeneity conditions that deliver the quantity-theory result are ...
Conference Paper
Comments on paper by Hess, Small, and Brayton