'Home' Base and Monetary Base Rules: Elementary Evidence from the 1980s and 1990s
25 Pages Posted: 13 Jun 1997
Date Written: April 1997
Abstract
This paper evaluates the quantitative importance of removing U.S. currency held abroad from the monetary base. We nd that a simple macroeconometric model that uses home base has more explanatory power for changes in nominal income than when the total base is used. Moreover, proposed base rules for the conduct of monetary policy perform better when the model for home base is employed. The evidence from our elementary exercises suggests that accounting for foreign holdings of U.S. currency may be important in other contexts also.
JEL Classification: E52
Suggested Citation: Suggested Citation
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