An examination of the ability of foreign exchange intervention to signal upcoming changes in monetary policy, showing that for such a signaling mechanism to make sense, the link between intervention and monetary policy should be clear, the implied policy should be credible, and information about...

What is the best way to achieve price stability? Conventional wisdom says that a tough, independent central bank is all that is necessary. However, a new view—the fiscal theory of the price level—argues that an appropriate fiscal policy is also required, no matter how tough the central bank...

In the United States, the Federal Reserve has responsibility for both monetary policy and bank supervision. Other countries separate these functions to varying degrees. What lies behind this global diversity? Should a central bank be charged with conducting monetary policy and regulating banks,...

A discussion of the relationship between monetary and fiscal policy, concluding that sound policy, be it monetary or fiscal, should have clear objectives, verifiable outcomes, and rules that are consistently followed.

An examination of the monetary policy goals of the Federal Reserve System, with a discussion of the role of the M1 target.

Foreign-exchange-market intervention is generally ineffective when undertaken independent of monetary policy. But when undertaken as a goal of monetary policy, exchange-rate management can compromise price stability. This Economic Commentary explains the difficulties of implementing an...

The FOMC has two objectives: maximizing sustainable economic growth and maintaining price stability. At times-like the past year-these goals appear to be in conflict. This Commentary outlines some economic theory that suggests that in the long run, the FOMC can achieve its two objectives by...

The author finds that because the level of excess reserves depends directly on the Federal Reserve's monetary policy stance, this measure is generally a poor indicator of credit availability.

In order to set monetary policy appropriately, policymakers need to assess current economic conditions, understand how the economy got to where it is, and have a good idea of where it is heading. Because economic conditions are always in flux, good communications are important to successful...

Should central bankers be free to decide what policy actions they will take and when they will take them, or should they agree to an explicit policy rule and stick to it? The discretion versus rules debate is an old one; unfortunately, it has rarely addressed the fact that the benefits of moving...