Showing papers by "Federal Reserve System published in 1971"
TL;DR: In this paper, the authors proposed a model and the impact of monetary policy and the burden of adjustment and the foreign trade multiplier on the global economy, and discussed policy coordination, capital mobility, and sterilization.
Abstract: I. Solution of the model and the impact of monetary policy, 121.—II. Burden of adjustment and the foreign trade multiplier, 129.—III. Policy coordination, capital mobility, and sterilization, 133.
14 citations
12 citations
TL;DR: In this paper, a solution to the "instrument problem" is determined within the context of the Hicksian IS-LM model, where the monetary authorities may operate through either interest rate changes or money stock changes, but not through both independently, and therefore must decide whether to use the interest rate or the money stock as the policy instrument.
Abstract: In this paper a solution to the "instrument problem"-more commonly known as the "target problem"-is determined within the context of the Hicksian IS-LM model. Baldly stated, the problem arises as a result of the fact that the monetary authorities may operate through either interest rate changes or money stock changes, but not through both independently, and therefore must decide whether to use the interest rate or the money stock as the policy instrument. The analysis produces two major findings. First, for some values of the parameters an interest rate policy is superior to a money stock policy while for other values of the parameters the reverse is true. Second, it is possible to define a combination policy in which the interest rate and money stock are maintained in a certain relationship to each other -the nature of the relationship depending on the values of the parameters and to show that the optimal combination policy is as good as or superior to either the interest rate or money stock policies no matter what the values of the parameters. The remainder of this section will be spent in clarifying some terminological questions connected with the words "instrument" and "target." Then in Section II the nature of the instrument problem will be discussed more carefully and an intuitive solution to the problem will be presented. In Section III the intuitive solution is made precise by applying the theory of optimal decision making under uncertainty to a formal model. In Section IV it is shown that the "either-or" solution to the instrument problem can be improved
9 citations
TL;DR: In the second case, the firm invests I dollars and withholds R dollars for transactions purposes during the period (RIT), then commences to disinvest in amounts, C, for the remainder of the period, (IIT).
Abstract: In 1952 Professor William J. Baumol published an inventory model for determining the optimum transactions demand for cash.' The implications of this model have received considerable attention in subsequent literature, and the article has become a required reading for students of monetary theory. Considering the attention Baumol's model has received, it is curious that an apparent omission has not been recognized. Baumol presents two cases. In the second case the firm invests I dollars and withholds R dollars for transactions purposes during the period (RIT), then commences to disinvest in amounts, C, for the remainder of the period, (IIT). In deriving the demand for cash Baumol states, ". . . the total cost of withholding the R dollars and investing the I dollars will be
6 citations
2 citations