This paper revisits the issue of money growth versus the interest rate as the instrument of monetary policy. Using a dynamic stochastic general equilibrium framework, we examine the effects of alternative monetary policy rules on inflation persistence, the information content of monetary data,...

It is commonly believed that the Federal Reserve targeted money growth directly and allowed greater variation in interest rates during the October 1979-October 1982 period. Other things the same, this policy regime would be expected to increase the risk premium on the dollar exchange rate...

Conventional investigations of the "best" intermediate target variable for monetary policy have used a single criterion: the best fit between the behavior of an aggregate and that of some goal variable such as nominal spending or the aggregate price level. Ignored in this type of study, however,...

This paper develops a monetary model with taxes to account for the apparently asymmetric and time-varying effects of energy shocks on output and hours worked in post-World War II U.S. data. In our model, the real effects of an energy shock are amplified when the monetary authority responds to...

We use a dynamic stochastic general equilibrium model to address two questions about U.S. monetary policy: 1) Can monetary policy elevate output when it is below potential? and 2) Is the zero lower bound a trap? The model answer to the first question is yes it can, but the effect is only...