Maintaining Low Inflation: Money, Interest Rates, and Policy Stance

By Samuel Reynard. Social Science Research Network, 2007

161 citations recorded by the source corpus.

This paper presents a systematic empirical relationship between money and subsequent prices and output, using US, euro area and Swiss data since the 1960-70s. Monetary developments, unlike interest rate stance measures, are shown to provide qualitative and quantitative information on subsequent inflation. The usefulness of monetary analysis is contrasted to weaknesses in modeling monetary policy and inflation with respectively short-term interest rates and real activity measures. The analysis sheds light on the recent change in inflation volatility and persistence as well as on the Phillips curve flattening, and reveals drawbacks in pursuing a low inflation target without considering monetary aggregates. JEL Classification: E52, E58, E41, E3

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/a8e0b65f2b0a75ba5999a4755a622bbfdb2dd7f1

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In Economics and Econometrics

1. R. Horvath
2. Tomáš Havránek

Citations in the corpus

• The Time-Varying Policy Neutral Rate in Real Time: A Predictor for Future Inflation? (2009, background): “On the other hand, Reynard (2007), analyzing the U.S. and Swiss data, questions the reliability of the so-called policy mistakes, as he observes rather weak link between so-called policy mistakes and inflation relative to the inflation target.”