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A Proposal to Clarify the Objectives and Strategy of Monetary Policy

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  • Robert L. Hetzel

Abstract

Academic economists have perennially made arguments for the conduct of monetary policy constrained by an explicit rule. These arguments have gone nowhere. This paper advances a proposal to clarify Fed objectives and strategy in order to facilitate discussion leading to consensus over a desirable rule. Economists are likely to have more success in their quest for a rule if they follow the indirect strategy of pushing the Fed for more transparency about the systematic character of policy.

Suggested Citation

  • Robert L. Hetzel, 2016. "A Proposal to Clarify the Objectives and Strategy of Monetary Policy," Working Paper 16-11, Federal Reserve Bank of Richmond.
    • Handle: RePEc:fip:fedrwp:16-11
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    References listed on IDEAS

    as
    1. Marvin Goodfriend, 1993. "Interest rate policy and the inflation scare problem: 1979-1992," Proceedings, Board of Governors of the Federal Reserve System (U.S.).
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    4. Robert L. Hetzel, 1997. "The case for a monetary rule in a constitutional democracy," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 45-66.
    5. Vasco Cúrdia & Michael Woodford, 2010. "Credit Spreads and Monetary Policy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(s1), pages 3-35, September.
    6. Michael Woodford, 2012. "Inflation Targeting and Financial Stability," NBER Working Papers 17967, National Bureau of Economic Research, Inc.
    7. Robert E. Lucas, Jr., 1980. "Rules, Discretion, and the Role of the Economic Advisor," NBER Chapters, in: Rational Expectations and Economic Policy, pages 199-210, National Bureau of Economic Research, Inc.
    8. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
    9. John B. Taylor, 1999. "Monetary Policy Rules," NBER Books, National Bureau of Economic Research, Inc, number tayl99-1.
    10. Scott Sumner, 2014. "Nominal GDP Targeting: A Simple Rule to Improve Fed Performance," Cato Journal, Cato Journal, Cato Institute, vol. 34(2), pages 315-337, Spring/Su.
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    More about this item

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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