Money-financed Fiscal Policy in a Growing Economy

Infante, E. F.; Stein, Jerome L.

doi:10.1086/260865

Cited by 10 publications

(1 citation statement)

References 3 publications

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“…That is, there is very little informational content in the current rate of monetary expansion concerning the rate of inflation in the near future. '°I n our Bayesian framework, there is a prior anticipated rate of inflation ir*(t).11 Then, there is 8 This is explicitly developed in Stein (1982), and Infante and Stein (1980). Here, we attempt to simplify and focus exclusively upon the basic characteristics.…”

Section: The Sm Dyna%ic Modelmentioning

confidence: 99%

Can the Central Bank Achieve Price Stability?

Stein¹

1994

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HE FOMC'S STATED POLICY objectives are to 'foster price stability and promote sustainable growth in output!' Can these objectives be achieved with the tools available? We know that there is a long-run relationship between the ratio M/y= Money/real GDP and the P-GDP deflator of the formwhere V is the velocity function, shown in Figure 1~The Federal Reserve would like to select ranges for monetary growth over the coming year consistent with price stability) This is the policy of monetary targeting. The rationale for the policy of monetary targeting is the existence of a stable and reliable relationship between the rate of growth of monetary aggregate Mi [denoted~(t)] and the rate of inflation (denoted it-) either during year t or possibly t+ I of the form (b) tO) = c + c'it 1 O) or (c) it-O) = c + Equation (a) is a long-run relation between the price level and the stock of money per unit of real GDp, and equations (b) and (c) are shorterrun relations between the rate of growth of prices and the rate of growth of money. They are quite different.

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Section: The Sm Dyna%ic Modelmentioning

confidence: 99%