Eurosystem Monetary Targeting: Lessons from U.S. Data

31 Pages Posted: 13 Oct 2010 Last revised: 13 Feb 2022

See all articles by Glenn D. Rudebusch

Glenn D. Rudebusch

Federal Reserve Bank of San Francisco

Lars E. O. Svensson

Stockholm School of Economics; Stockholm University - Institute for International Economic Studies (IIES); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

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Date Written: June 1999

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.

Suggested Citation

Rudebusch, Glenn D. and Svensson, Lars E.O., Eurosystem Monetary Targeting: Lessons from U.S. Data (June 1999). NBER Working Paper No. w7179, Available at SSRN: https://ssrn.com/abstract=1691285

Glenn D. Rudebusch (Contact Author)

Federal Reserve Bank of San Francisco ( email )

101 Market Street
San Francisco, CA 94105
United States

Lars E.O. Svensson

Stockholm School of Economics ( email )

PO Box 6501
Stockholm, 11383
Sweden

HOME PAGE: http://larseosvensson.se

Stockholm University - Institute for International Economic Studies (IIES) ( email )

Stockholm, SE-10691
Sweden

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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