Skip to main content

Intermediate monetary targets and macroeconomic fluctuations

Buy Article:

$55.00 plus tax (Refund Policy)

It is investigated whether the choice of intermediate target has altered macroeconomic fluctuations and whether the observed changes are consistent with predictions from economic theory. Since implications from the theoretical literature focus on the effects of structural disturbances, an empirical analysis must identify these effects. The structural vector autoregressive (VAR) technique estimates structural disturbances using restrictions from standard macroeconomic theory. Based on descriptions of actual targeting procedures by insiders to Federal Reserve policy decisions, the intermediate target for the United States is identified as the interest rate from 1951 to 1969 and money from 1970 to 1986. VAR models are estimated over each subsample to assess whether the estimated structural disturbances cause endogenous variables to behave as economic theory predicts. Tests are also performed to assess whether or not the targeting rule affects the variance of endogenous variables attributable to structural shocks. The impulse responses are typically consistent with economic theory, with a few exceptions that have been similarly noted by other researchers. All significant differences in variance are predicted by economic theory, except for one which can be explained by unusually large shocks to defence expenditures that coincided with the monetary targeting episode.
No Reference information available - sign in for access.
No Citation information available - sign in for access.
No Supplementary Data.
No Data/Media
No Metrics

Document Type: Research Article

Publication date: 1996-10-01

More about this publication?
  • Access Key
  • Free content
  • Partial Free content
  • New content
  • Open access content
  • Partial Open access content
  • Subscribed content
  • Partial Subscribed content
  • Free trial content
Cookie Policy
Cookie Policy
Ingenta Connect website makes use of cookies so as to keep track of data that you have filled in. I am Happy with this Find out more