Issues Concerning Nominal Anchors for Monetary Policy

Author/Editor:

Michael Mussa ; Robert P Flood

Publication Date:

May 1, 1994

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper presents a selective survey of issues relevant to the choice of nominal anchors for monetary policy. Section I reviews long price-level histories for the United Kingdom and United States, which reveal that the price level behaved very differently following WWII in these countries than it had done in previous post-war experiences. In particular following WWII the responsibilities of monetary policy expanded to encompass a business- cycle stabilization role and the nominal anchor shifted from the fixed anchor or price-level stability to the moving anchor of inflation-rate stability. The remaining sections of the paper review some of the considerations that are relevant to setting the average inflation rate in countries without a fixed nominal anchor.

Series:

Working Paper No. 94/61

Subject:

Notes:

Reviews long price-level histories for the United Kingdom and United States.

English

Publication Date:

May 1, 1994

ISBN/ISSN:

9781451848106/1018-5941

Stock No:

WPIEA0611994

Format:

Paper

Pages:

41

Please address any questions about this title to publications@imf.org