Abstract
This paper provides a detailed examination of various money stock control procedures in a rational expectations environment. The analysis investigates the relative efficiency of controlling monetary aggregate through the use of an interest rate instrument or through various reserve measures under both lagged and contemporaneous reserve requirements. A major result is that borrowed reserve targeting is not necessarily equivalent to a noisy interest rate instrument. Further, it is possible that borrowed reserves can represent a more efficient control procedure than in interest rate instrument. However, total reserve targeting under contemporaneous reserve requirements generally provides the most efficient control of money and the lowest variability of prices and output. However, total reserve targeting also implies higher interest rate volatility, which may be one reason why the Fed has never adopted this procedure.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
