A Review of Empirical Studies of the Money Supply Mechanism
نویسنده
چکیده
The use of a reserve aggregate as an operating target raises questions about the interest rate effects of policy actions on the ability of the Federal Reserve to achieve a desired growth in the money stock. Open market operations affect both reserve aggregates and interest rates. Changes in interest rates, in turn, influence the portfolio decisions of banks and the public, and are believed by some to be a complicating factor in the achievement of a desired money growth. This article surveys empirical evidence on the interest rate sensitivity of the money supply, and concludes that this interest elasticity appears to be extremely low. Hence, this factor should exert a negligible effect on the ability of the Federal Reserve to influence money stock growth through control of a reserve aggregate.
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