Monday, July 15, 2013

The assignment problem - Dr. Subir Gokarn

........... in monetary policy, the instruments are either the quantity of money or its price (the interest rate). Theory and widespread evidence suggest that the macroeconomic outcome that these are most closely linked to is the inflation rate. Therefore, the assignment rule would suggest that inflation control should be the dominant objective of monetary policy. If other objectives are being pursued, other appropriate instruments must be created. So is a zone approach to policy completely ruled out? ...........

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