In recent years, the Federal Reserve has become more explicit in stating a goal of gradually reducing inflation to near zero rtes. An important consideration in seeking lower inflation is the transition cost (lost output and employment) incurred in the process. In this paper we ask whether the...

The primary goal of Federal Reserve monetary policy is to foster maximum sustainable growth in the U.S. economy by achieving price stability over time. Although considerable progress toward price stability has been made since the early 1980s, inflation remains above the level most analysts would...

The erratic behavior of credit aggregates in recent years has led to questions about whether any credit measure is useful in conducting monetary policy. Empirical evidence suggests that the private component of total credit may provide useful information to monetary policymakers.

Most central banks conduct monetary policy by setting targets for overnight interest rates. During the 1990s, central banks have tended to move these interest rates in small steps without reversing direction quickly, a practice called interest rate smoothing. For example, the majority of Federal...