The Right Rabbit: Which Intermediate Target Should the Fed Pursue?
The importance of monetary policy to economic well-being is widely acknowledged. Given the recurring problems of recession and inflation that have plagued the U.S. and the world economies for the past two decades, there is general interest in attempts to improve the conduct of monetary policy. During the 1970s and the early 1980s monetary policy has been conducted using an intermediate targeting approach. This paper discusses the relative merits and demerits of the several alternative candidate intermediate targets.