IDEAS home Printed from https://ideas.repec.org/a/sae/amerec/v39y1995i1p32-39.html
   My bibliography  Save this article

Expected Price Level Movements and the Use of Information Variables

Author

Listed:
  • Charles Hegji

Abstract

The present paper develops a model to explain expected movements in the price level by considering the case in which the money supply is used as an information variable. The analysis is based on a simple stochastic macro model, in which movements in GNP are linked to monetary policy through expected price movements. The model uses this setting to demonstrate that using the money supply as a variable to provide information about its ultimate objectives requires the authority to abandon a strict price level rule, even if the ultimate objectives include the price level. This suggests that expected movements in the price level can be an outcome of the optimal monetary policy process, rather than a by-product of the use of extraneous objectives such as intermediate targets.

Suggested Citation

  • Charles Hegji, 1995. "Expected Price Level Movements and the Use of Information Variables," The American Economist, Sage Publications, vol. 39(1), pages 32-39, March.
    • Handle: RePEc:sae:amerec:v:39:y:1995:i:1:p:32-39
    DOI: 10.1177/056943459503900105
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/056943459503900105
    Download Restriction: no
    File URL: https://libkey.io/10.1177/056943459503900105?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Saving, Thomas R, 1979. "Money Supply Theory with Competitively Determined Deposit Rates and Activity Charges," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(1), pages 22-31, February.
    2. Kareken, John H & Muench, Thomas & Wallace, Neil, 1973. "Optimal Open Market Strategy: The Use of Information Variables," American Economic Review, American Economic Association, vol. 63(1), pages 156-172, March.
    3. Benavie, Arthur, 1983. "Optimal monetary policy under rational expectations with a micro-based supply function," Journal of Macroeconomics, Elsevier, vol. 5(2), pages 149-166.
    4. Mitchell, Douglas W., 1980. "The relation between alternative choices of monetary policy tool and information variable," Journal of Macroeconomics, Elsevier, vol. 2(3), pages 247-256.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Charles Freedman, 1981. "Monetary Aggregates as Targets: Some Theoretical Aspects," NBER Working Papers 0775, National Bureau of Economic Research, Inc.
    2. Tarkka, Juha, 1994. "Implicit interest as price discrimination in the bank deposit market," Research Discussion Papers 1/1994, Bank of Finland.
    3. Lars E. O. Svensson, 2000. "Does the P* Model Provide Any Rationale for Monetary Targeting?," German Economic Review, Verein für Socialpolitik, vol. 1(1), pages 69-81, February.
    4. Lee TongHung & Hwang Hoyoung, 2001. "Money, Interest Rate and Foreign Exchange Rate As Indicator Variables Of Monetary Policy," International Economic Journal, Taylor & Francis Journals, vol. 15(2), pages 77-98, June.
    5. Lars E. O. Svensson, 1999. "Monetary policy issues for the Eurosystem," Proceedings, Federal Reserve Bank of San Francisco.
    6. Rik Hafer, 1984. "Money, debt and economic activity," Review, Federal Reserve Bank of St. Louis, vol. 66(Jun), pages 18-25.
    7. Lars E. O. Svensson, 1999. "How should monetary policy be conducted in an era of price stability?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 195-259.
    8. Tarkka, Juha, 1994. "Risk sharing in the pricing of payment services by banks," Bank of Finland Research Discussion Papers 18/1994, Bank of Finland.
    9. Coenen, Gunter & Levin, Andrew & Wieland, Volker, 2005. "Data uncertainty and the role of money as an information variable for monetary policy," European Economic Review, Elsevier, vol. 49(4), pages 975-1006, May.
    10. Willem H. Buiter, 1979. "Feedback and the Use of Current Information: The Use of General Linear Policy Rules in Rational Expectations Models," NBER Working Papers 0335, National Bureau of Economic Research, Inc.
    11. Lars E. O. Svensson, 2001. "Price Stability as a Target for Monetary Policy: Defining and Maintaining Price Stability," Palgrave Macmillan Books, in: Deutsche Bundesbank (ed.), The Monetary Transmission Process, chapter 2, pages 60-111, Palgrave Macmillan.
    12. Sargent, Thomas J. & Wallace, Neil, 1976. "Rational expectations and the theory of economic policy," Journal of Monetary Economics, Elsevier, vol. 2(2), pages 169-183, April.
    13. Erick Lahura, 2017. "Monetary Aggregates and Monetary Policy in Peru," BCAM Working Papers 1704, Birkbeck Centre for Applied Macroeconomics.
    14. Tarkka, Juha, 1994. "Implicit interest as price discrimination in the bank deposit market," Bank of Finland Research Discussion Papers 1/1994, Bank of Finland.
    15. Benjamin M. Friedman, 1982. "Using a credit aggregate target to implement monetary policy in the financial environment of the future," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 223-265.
    16. Matthew B. Canzoneri & Dale W. Henderson & Kenneth S. Rogoff, 1983. "The Information Content of the Interest Rate and Optimal Monetary Policy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(4), pages 545-566.
    17. Sargent, Thomas J., 1996. "Expectations and the nonneutrality of Lucas," Journal of Monetary Economics, Elsevier, vol. 37(3), pages 535-548, June.
    18. Benjamin M. Friedman, 1984. "The Value of Intermediate Targets in Implementing Monetary Policy," NBER Working Papers 1487, National Bureau of Economic Research, Inc.
    19. Warwick J. McKibbin & Kanhaiya Singh, 2003. "Issues in the Choice of a Monetary Regime for India," Chapters, in: Kaliappa Kalirajan & Ulaganathan Sankar (ed.), Economic Reform and the Liberalisation of the Indian Economy, chapter 10, pages 221-274, Edward Elgar Publishing.
    20. James G. Hoehn & Bennett T. McCallum, 1982. "Money stock control with reserve and interest rate instruments under rational expectations," Working Papers 8201, Federal Reserve Bank of Dallas.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:amerec:v:39:y:1995:i:1:p:32-39. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: http://journals.sagepub.com/home/aex .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.