Scandinavian Working Papers in Economics

Seminar Papers,
Stockholm University, Institute for International Economic Studies

No 672: Eurosystem Monetary Targeting: Lessons from U.S. Data

Glenn Rudebusch () and Lars Svensson ()
Additional contact information
Glenn Rudebusch: Federal Reserve Bank of San Fransisco
Lars Svensson: Institute for International Economic Studies, Stockholm University, Postal: Stockholm University, S-106 69 Stockholm, Sweden

Abstract: Using a small empirical model of inflation, output, and money estimated on U.S: data, we compare the relative performance of monetary targeting and inflation targeting. The results show that monetary targeting would be quite inefficient, with both higher inflation and output variability. This is true even with a deterministic money demand formulation. In this framework, there is thus no support for the prominent role given to money growth in the Eurosystem's monetary policy strategy.

Keywords: inflation targeting; monetary targeting; ECB

JEL-codes: E42; E52; E58

35 pages, June 1, 1999

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