Two Reasons Why Money and Credit May be Useful in Monetary Policy / Lawrence Christiano, Roberto Motto, Massimo Rostagno.

Format:

Book

Author/Creator:

Christiano, Lawrence.

Contributor:

National Bureau of Economic Research.

Motto, Roberto.

Rostagno, Massimo.

Series:

Working Paper Series (National Bureau of Economic Research) no. w13502.

NBER working paper series no. w13502

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2007.

Summary:

We describe two examples which illustrate in different ways how money and credit may be useful in the conduct of monetary policy. Our first example shows how monitoring money and credit can help anchor private sector expectations about inflation. Our second example shows that a monetary policy that focuses too narrowly on inflation may inadvertently contribute to welfare-reducing boom-bust cycles in real and financial variables. The example is of some interest because it is based on a monetary policy rule fit to aggregate data. We show that a policy of monetary tightening when credit growth is strong can mitigate the problems identified in our second example.

Notes:

Print version record

October 2007.