Some simple and pleasant algebra of short run monetary control PDF
Preview Some simple and pleasant algebra of short run monetary control
UNIVERSITY OF ILLINOIS LIBRARY AT URBANA CHAMPAIGN BOOKSTACKS Digitized by the Internet Archive in 2012 with funding from University of Illinois Urbana-Champaign http://www.archive.org/details/somesimplepleasa1391spre Faculty Working Paper 91-0139-1 STX 330 B3B5 / 1991:139:? COPY 2 \ oft Some Simple and Pleasant Algebra of Short Run Monetary Control Case M. Sprenkle Department ofEconomics Bureau ofEconomic and Business Research College ofCommerce and Business Administration University of Illinois at L'rbana-Champaign BEBR FACULTY WORKING PAPER NO. 91-0139-1 College of Commerce and Business Administration University of Illinois at Urbana-Champaign May 1991 Some Simple and Pleasant Algebra of Short Run Monetary Control Case M. Sprenkle Department of Economics University of Illinois at Grbana-Champaign Abstract An operating target is suggested for a monetary authority in a simple world. In this world currency movements should be weighted by the required reserve ratio on demand deposits. With this weighting of currency, control of the money supply is independent of the required reserve ratio, so that reserve requirements can be kept low without giving up control. This result holds in a Poole type world of an optimal weighting on money changes and interest changes for an intermediate target, and the optimal target weight for the interest rate is also given for such an intermediate target. The simple model is expanded for control of broad money and interest rates.
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