Featured Research

from universities, journals, and other organizations

Monetary Aggregates Play Little Role In The Conduct Of Monetary Policy

Date:
December 3, 2008
Source:
Wiley-Blackwell
Summary:
The analysis finds that none of the arguments provides a compelling reason to assign a prominent role to monetary aggregates.

In conventional macroeconomic thinking, the money supply is considered the main determinant of long-run inflation. A variety of monetary aggregates have been proposed to measure the money supply. Yet, nowadays, monetary aggregates play little role in monetary policy deliberations at most central banks.

Related Articles


A new study in the Journal of Money, Credit and Banking examines the leading arguments for assigning an important role to tracking the growth of monetary aggregates when making decisions about monetary policy. The analysis finds that none of the arguments provides a compelling reason to assign a prominent role to monetary aggregates.

Michael Woodford of Columbia University reviews several of the most important arguments that have been made for paying attention to money, considering both the omissions of an analysis without money and the advantages of the information revealed by monetary trends.

While they do have their uses, Woodford contends that monetary aggregates should not be used as policy targets or assigned a prominent role in monetary policy strategy.

The economy’s current condition and projected evolution under alternative policy paths may depend on a large number of unobserved variables. Monetary aggregates, along with other indicators, can be used to provide information about these unobserved variables, though there is little theoretical or empirical ground to think that these measures are especially revealing about any of the unobserved variables that are most crucial for accurate projections. Monetary aggregates thus may help to determine the appropriate policy, but only along many other variables and not in a way that would make them targets in the conduct of policy.

“When one examines the reasons that have been primarily responsible for the appeal of the idea of money growth as a simple diagnostic for monetary policy, one finds that they will not support the weight that they are asked to bear,” Woodford notes.


Story Source:

The above story is based on materials provided by Wiley-Blackwell. Note: Materials may be edited for content and length.


Journal Reference:

  1. Michael Woodford. How Important Is Money in the Conduct of Monetary Policy? Journal of Money, Credit and Banking, 2008; 40 (8): 1561-1598 [link]

Cite This Page:

Wiley-Blackwell. "Monetary Aggregates Play Little Role In The Conduct Of Monetary Policy." ScienceDaily. ScienceDaily, 3 December 2008. <www.sciencedaily.com/releases/2008/12/081203184645.htm>.
Wiley-Blackwell. (2008, December 3). Monetary Aggregates Play Little Role In The Conduct Of Monetary Policy. ScienceDaily. Retrieved December 19, 2014 from www.sciencedaily.com/releases/2008/12/081203184645.htm
Wiley-Blackwell. "Monetary Aggregates Play Little Role In The Conduct Of Monetary Policy." ScienceDaily. www.sciencedaily.com/releases/2008/12/081203184645.htm (accessed December 19, 2014).

Share This


More From ScienceDaily



More Science & Society News

Friday, December 19, 2014

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

Navy Unveils Robot Fish

Navy Unveils Robot Fish

Reuters - Light News Video Online (Dec. 18, 2014) The U.S. Navy unveils an underwater device that mimics the movement of a fish. Tara Cleary reports. Video provided by Reuters
Powered by NewsLook.com
Kids Die While Under Protective Services

Kids Die While Under Protective Services

AP (Dec. 18, 2014) As part of a six-month investigation of child maltreatment deaths, the AP found that hundreds of deaths from horrific abuse and neglect could have been prevented. AP's Haven Daley reports. (Dec. 18) Video provided by AP
Powered by NewsLook.com
How 2014 Shaped The Future Of The Internet

How 2014 Shaped The Future Of The Internet

Newsy (Dec. 18, 2014) It has been a long, busy year for Net Neutrality. The stage is set for an expected landmark FCC decision sometime in 2015. Video provided by Newsy
Powered by NewsLook.com
White House: Sony Hack a 'serious National Security Matter'

White House: Sony Hack a 'serious National Security Matter'

AFP (Dec. 18, 2014) White House spokesperson Josh Earnest says cyber attacks that ultimately prompted Sony Pictures to scrap the release of a madcap comedy about North Korea are a "serious national security matter." Duration: 00:35 Video provided by AFP
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:

Breaking News:

Strange & Offbeat Stories


Science & Society

Business & Industry

Education & Learning

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile: iPhone Android Web
Follow: Facebook Twitter Google+
Subscribe: RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins