This primer provides an understanding of the mechanics and objectives of monetary policy using a benchmark new neoclassical synthesis (NNS) macromodel. The NNS model incorporates classical features such as a real business cycle (RBC) core, and Keynesian features such as monopolistically...

From 1987 to 2001 Federal Reserve interest rate policy achieved a transition from relatively low inflation to virtual price stability. Preemptive policy actions in 1994 secured near full Fed credibility for low inflation. And the Fed became more transparent, immediately announcing changes in its...

An accord for Fed credit policy should supplement the monetary policy Accord of 1951 and should be based on three principles: (1) credit policy should not fund insolvent institutions, (2) credit policy should not fund expenditures that ought to get congressional authorization, and (3) Congress...

The Fed's asset acquisition practices should adhere to two closely related principles that would support monetary policy by strengthening the Fed's independence: asset acquisition should respect the integrity of fiscal policy and minimize the risk of political entanglements involving Fed credit...

Central bank or International Monetary Fund lending should be regarded as a line of credit, analogous to private line-of-credit products. Contractual provisions in private line-of-credit arrangements are designed to control managerial moral hazard and provide a means for profit-maximizing...