Thursday, July 9, 2009

evolution of monetary policy

Monetary policy, as determined and executed in Great Britain by the bank of England and in the United States by the Federal Reserve System, has changed from decade to decade. (It has also changed year to year and sometimes even month to month.) The monetary policy problems of the 1930is were not the same problems faced by these monetary authorities during World War II. I likewise, the problems of the 1950is, 1960is, and 1970is have all been different. In the 1960is the earlier problems of stabilization were replaced by a greater concern for economic growth. By the 1970is, the trade-off problem between greater growth and lower rates of unemployment, on the one hand, and stabilization of price level, on the other hand, seemed very important to the monetary authorities.
Furthermore, as the policy orientation changed, so too did the use of short run objects in the use of open market operations. In particular, in the 1970is there has been a greater emphasis on seeking to attain the desired rate of growth in various monetary aggregates, or various definitions of the money supply, concern with stability in the money market and a day-by-day concern with certain key money market rates, such as the federal funds rate, also continued to be preoccupations of the monetary authorities.

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