The Conduct of Domestic Monetary Policy

  title={The Conduct of Domestic Monetary Policy},
  author={Robert J. Gordon},
This paper develops the view that monetary policy operates within a set of basic constraints that limit the set of outcomes that it can achieve.These include constraints on aggregate supply behavior that determine how a given path of nominal income growth will be divided between inflation and output growth, as well as "velocity" constraints that influence the path of nominal income growth that will result from any given time path for the monetary base, monetary aggregates, or interest rates.The… 
On the performance and practicality of nominal GDP targeting in Germany
This paper examines the performance of nominal income targeting as a possible direction for monetary policy. The existing literature consists of historical counterfactual simulations to determine how
Targeting Nominal Income in a Dynamic Model
The author analyzes the choice of monetary policy rule in a perfect-foresight-planning model. Maximizing agents plan their lifetime consumption decisions in the face of two rigidities. First,
The Role of Demand Management in the Maintenance of Full Employment
This paper begins by identifying nominal price stickiness as the logical basis for the Keynesian or activist point of view concerning demand management policy. It then characterizes two alternative
Money, Inflation, and Growth in Pakistan
This paper attempts to investigate the linkage between the excess money supply growth and inflation in Pakistan and to test the validity of the monetarist stance that inflation is a monetary
Much of the controversy about reducing the federal deficit has arisen because policymakers lack a deficit policy that is a consistent part of broader macroeconomic policy. This is not surprising
How the Bundesbank Really Conducted Monetary Policy: An Analysis Based on Real-Time Data
Papers estimating the reaction function of the Bundesbank generally find that its monetary policy from the 1970s to 1998 can well be captured by a standard Taylor rule according to which the central
The optimality of nominal income targeting when wages are indexed to price
In the last decade there has been renewed interest in alternative monetary regimes, institutions, and policy procedures. One policy proposal that has received increased attention is nominal income
Money in the Era of Inflation Targeting
This paper provides evidence that the relationship between inflation and money growth has changed as the inflation-targeting regime has progressed. During the disinflation period (mid 1980s to mid or


The Choice among Monetary Aggregates as Targets and Guides for Monetary Policy
DIFFICULTIES IN MEETING its monetary targets led the Federal Reserve in October 1979 to adopt a new operating procedure to achieve firmer control over monetary aggregates. Yet the inflationary
Criteria for Useful Targeting: Money versus the Base and Other Variables
THE PROBLEM OF targeting variables numerically by means of monetary policy has acquired general interest as it has become increasingly clear that an all too flexible conduct of policy has led to very
Does Anticipated Monetary Policy Matter? An Econometric Investigation
A heated debate has arisen over the policy ineffectiveness proposition associate with the work of Lucas, Sargent, and Wallace. It postulates that anticipated aggregate demand policy will have no
Unanticipated Money and Economic Activity
This paper discusses ongoing research on the relation of money to economic activity in the post-World War I1 United States. As in previous work, the stress is on the distinction between anticipated
"Rational" Expectations, the Optimal Monetary Instrument, and the Optimal Money Supply Rule
Alternative monetary policies are analyzed in an ad hoc macroeconomic model in which the public's expectations about prices are rational. The ad hoc model is one in which there is long-run
The Demand for and Supply of Inflation
  • R. Gordon
  • Economics
    The Journal of Law and Economics
  • 1975
ECONOMIC research on the causes of inflation has been primarily devoted to the theoretical and empirical study of the links between government policy variables and the rate of inflation. While debate
Federal Reserve Policy, Interest Rate Volatility, and the U.S. Capital Raising Mechanism
The evidence presented in this paper leads to three conclusions about possible effects on the U.S. long-term capital. raising mechanism due to the sharp increase in interest rate volatility that has
Optimal choice of monetary policy instruments in a simple stochastic macro model
I. Introduction, 197. — II. The instrument problem, 199. — III. A static stochastic model, 203.— IV. The combination policy, 208. — V. A dynamic model, 209. — VI. Concluding observations, 214. —