Is There a Role for Monetary Aggregates in the Conduct of Monetary Policy? / Arturo Estrella, Frederic S. Mishkin.

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Estrella, Arturo

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w5845.Publication details: Cambridge, Mass. National Bureau of Economic Research 1996.Description: 1 online resource: illustrations (black and white)Subject(s):

E52 - Monetary Policy

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Abstract: We examine the potential policy role of monetary aggregates by attempting to use them as effectively as possible in the analysis of empirical relationships. We consider three possible roles: as information variables, as indicators of policy actions and as instruments in a policy rule. These require successively stronger and more stable relationships between the aggregates and the final policy targets. Our results show that in the United States since 1979, the monetary aggregates fall considerably short of those requirements, and results with German M3 are hardly more favorable. We also investigate whether empirical relationships are not reflective of causal relationships because of the use of these variables in counter cyclical policy. The results are reasonably consistent with that notion in the case of interest rates, but not in the case of the aggregates.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w5845 (Browse shelf(Opens below))	Not For Loan

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November 1996.

We examine the potential policy role of monetary aggregates by attempting to use them as effectively as possible in the analysis of empirical relationships. We consider three possible roles: as information variables, as indicators of policy actions and as instruments in a policy rule. These require successively stronger and more stable relationships between the aggregates and the final policy targets. Our results show that in the United States since 1979, the monetary aggregates fall considerably short of those requirements, and results with German M3 are hardly more favorable. We also investigate whether empirical relationships are not reflective of causal relationships because of the use of these variables in counter cyclical policy. The results are reasonably consistent with that notion in the case of interest rates, but not in the case of the aggregates.