Monetary Policy Strategy PDF
Preview Monetary Policy Strategy
Monetary Policy Strategy (cid:28)(cid:29) (cid:92)(cid:104)(cid:91)(cid:90)(cid:91)(cid:104)(cid:95)(cid:89)(cid:22)(cid:105)(cid:36)(cid:22)(cid:99)(cid:95)(cid:105)(cid:94)(cid:97)(cid:95)(cid:100) Monetary Policy Strategy Monetary Policy Strategy Frederic S.Mishkin TheMITPress Cambridge,Massachusetts London,England 62007MassachusettsInstituteofTechnology Allrightsreserved.Nopartofthisbookmaybereproducedinanyformbyanyelectronicormechanical means (including photocopying, recording, or information storage and retrieval) without permission in writingfromthepublisher. MITPress booksmaybepurchasedat specialquantitydiscountsfor businessor salespromotional use. Forinformation,pleasee-mailspecial_sales@mitpress.mit.eduorwritetoSpecialSalesDepartment,The MITPress,55HaywardStreet,Cambridge,MA02142. ThisbookwassetinTimesNewRomanandSyntaxon3B2byAscoTypesetters,HongKongandwas printedandboundintheUnitedStatesofAmerica. LibraryofCongressCataloging-in-PublicationData Mishkin,FredericS. Monetarypolicystrategy/byFredericS.Mishkin. p. cm. Includesbibliographicalreferencesandindex. ISBN978-0-262-13482-8(hardcover:alk.paper) 1.Monetarypolicy. I.Title. HG230.3M57 2007 339.503—dc22 2006033821 10 9 8 7 6 5 4 3 2 1 To Laura and Matthew Contents Preface ix 1 HowDidWeGetHere? 1 FredericS.Mishkin I FundamentalIssuesintheConductofMonetaryPolicy 29 IntroductiontoPartI 31 2 WhatShouldCentralBanksDo? 37 FredericS.Mishkin 3 TheTransmissionMechanismandtheRoleofAssetPricesinMonetaryPolicy 59 FredericS.Mishkin 4 TheRoleofOutputStabilizationintheConductofMonetaryPolicy 75 FredericS.Mishkin 5 CanCentralBankTransparencyGoTooFar? 89 FredericS.Mishkin 6 IsThereaRoleforMonetaryAggregatesintheConductofMonetaryPolicy? 109 ArturoEstrellaandFredericS.Mishkin 7 RethinkingtheRoleofNAIRUinMonetaryPolicy:ImplicationsofModelFormulation andUncertainty 133 ArturoEstrellaandFredericS.Mishkin II MonetaryPolicyStrategyinAdvancedEconomies 159 IntroductiontoPartII 161 8 CentralBankBehaviorandtheStrategyofMonetaryPolicy:ObservationsfromSix IndustrializedCountries 165 BenBernankeandFredericS.Mishkin viii Contents 9 InflationTargeting:ANewFrameworkforMonetaryPolicy? 207 BenBernankeandFredericS.Mishkin 10 InternationalExperienceswithDifferentMonetaryPolicyRegimes 227 FredericS.Mishkin 11 WhytheFederalReserveShouldAdoptInflationTargeting 253 FredericS.Mishkin III MonetaryPolicyStrategyinEmergingMarketandTransitionEconomies 263 IntroductiontoPartIII 265 12 InflationTargetinginEmergingMarketCountries 271 FredericS.Mishkin 13 MonetaryPolicyStrategiesforLatinAmerica 279 FredericS.MishkinandMiguelA.Savastano 14 MonetaryPolicyStrategiesforEmergingMarketCountries:LessonsfromLatin America 309 FredericS.MishkinandMiguelA.Savastano 15 InflationTargetinginTransitionEconomies:ExperienceandProspects 345 JiriJonasandFredericS.Mishkin,withcommentbyOlivierBlanchard 16 ADecadeofInflationTargetingintheWorld:WhatDoWeKnowandWhatDoWe NeedtoKnow? 405 FredericS.MishkinandKlausSchmidt-Hebbel 17 TheDangersofExchange-RatePegginginEmergingMarketCountries 445 FredericS.Mishkin 18 TheMirageofExchange-RateRegimesforEmergingMarketCountries 465 GuillermoA.CalvoandFredericS.Mishkin IV WhatHaveWeLearned? 485 IntroductiontoPartIV 487 19 EverythingYouWantedtoKnowaboutMonetaryPolicyStrategy,butWereAfraidto Ask 489 FredericS.Mishkin Sources 537 Index 539 Preface Although my father fought in Europe in World War II, the central event in his life was the Great Depression. When I expected (and hoped) that he would regale us with stories about his war experience, he instead told us about life in the 1930s and how devastating the collapse in the economy had been to him and his family. This experience iswhat set meon the path to becoming an economist. My father’sstories made me realize how large an impact the state of the economy could have on peo- ple’s lives, and I wanted to understand how better policies could lead to improved outcomes for the aggregate economy. WhenIstartedtakinggraduatecoursesatMITin1972(IactuallystartedmyPhD program while still an undergraduate in my senior year at MIT, and then continued o‰cially in 1973), I was exposed to two wonderful teachers in monetary economics, Stanley Fischer and Franco Modigliani. Both made me see that monetary policy played a key role in the health of the macro economy and I was hooked: I knew that I was going to become a monetary economist. A major intellectual influence on my thinking was Milton Friedman and Anna Schwartz’s A Monetary History of the United States, which Stan encouraged his students to read telling us that if we were serious about being monetary economists, then we had to read Friedman and Schwartz before going to bed. Being a dutiful student, I took Stan’s advice and was enthralled by the book. Friedman and Schwartz made it abundantly clear that bad monetary policies could lead to disaster. In addition, their use of historical episodes to demonstrate the importance of monetary policy to the economy led me to value the use of case studies as a research tool, which features prominently in a lot of the economics discussed in this book. Giventhisintellectualbackground,myresearch inacademiahasfocusedonissues that are central to monetary policymaking. However, after I was the director of re- search and executive vice president of the Federal Reserve Bank of New York from 1994 to 1997, my research took on a more practical bent and I began to write far moreextensivelyonstrategiesfortheconductofmonetarypolicy.Thisbookisacol- lectionof my work onthis subject, particularlyover the pastdecade.
The list of books you might like
