ECON 330 Study Guide - Midterm Guide: Nairu, Federal Funds Rate, Phillips Curve
Document Summary
Midterm 2 review chapter 16: the conduct of monetary policy: strategy and tactics. * info on whether the central bank is achieving target is known almost immediately. Help fix inflation expectations (produce less inflation) * almost immediate accountability for monetary policy to keep inflation low. Help restrain monetary policy maker from falling into the "time-inconsistency" trap. * relies too much on strong relationship b/w monetary aggregate and goal variable. 2. long-term institutional commitment to price stability to monetary policy --- achieve inflation goal. 3. info-inclusive approach where many variables (not just monetary aggregates) are used in monetary policy decision making. 4. increased transparency of monetary policy --- increased communication b/w ppl & policy makers. 5. increased accountability of central bank for reaching inflation objectives. * does not rely on stable money-inflation relationship. * limits time-inconsistency problem through discouragement of expansionary policy. * its worked in past = low inflation with economic growth.
