Federal Reserve Bank of Atlanta E C O N O M I C R E V I E W Third Quarter 2003 I t is a great pleasure to attend this conference on monetary policy and learning and enjoy the many excellent papers presented here. I am very grateful for the opportunity to speak to this distinguished audience of researchers and policymakers, and I hope my remarks will stimulate some further discussion. I will tal...

What is the optimal institutional structure for an independent central bank? The paper shows when it will be optimal for a country to have a central bank to be organized according to federal, purely national or a combination of both aspects. The analysis is then extended to a supranational monetary union and it is shown which organizational structure of a common central bank is optimal for part...

The purpose of the present paper is to examine the implications of the Federal Reserve-MIT-Penn Model (hereafter referred to as the FMP model) with respect to the central question with which this conference is concerned, namely whether and, if so, to what extent, monetary policy affects economic activity through its direct impact on cosumers’ expenditure. For the purpose of this paper we have c...

We re-examine optimal monetary policy when lump-sum taxes are unavailable. Under commitment, we show that, with alternative utility functions to that considered in Nicolini’s related analysis, the direction of the incentive to cheat may depend on the initial level of government debt, with low debt creating an incentive towards surprise deflation, but high debt the reverse. Under discretion, we ...

In the Keynesian model we thought of monetary policy as exogenous in the sense that the money supply, Mt, was set exogenously. This is useful for understanding the model but doesn’t really describe how monetary policy works in practice. In the real world, central banks adjust the money supply (and hence interest rates) endogenously in response to changing conditions. In this set of notes we dis...

Many econometric studies use both a narrative approach and an interest rate series to investigate the e ects of US monetary policy. The two alternative measures provide very similar conclusions. This similarity in the results is not likely to be found when central banks use numerous instruments, including unconventional quantitative targets. This paper studies the French experience with tempora...

Liquidity and deflationary spirals self-generate endogenous risk and redistribute wealth. Monetary policy can mitigate these effects and help rebalance wealth after an adverse shock, thereby reducing endogenous risk, stabilizing the economy, and stimulating growth. The redistributive channel differs from the classical Keynesian interest rate channel in models with price stickiness. Central bank...

According to my dictionaries, "credibility" is the property of being credible, with the latter meaning roughly the same as believable. So with this definition, a policy lacks credibility if it is one that could not reasonably be believed. It would appear that William Fellner (1976, 1979), who introduced the idea into the macroeconomic arena, chose this particular word because he believed that t...

A segmented markets model of monetary policy is constructed, in which a novel feature is goods market segmentation, and its relationship to conventional asset market segmentation. The implications of the model for the response of prices, interest rates, consumption, labor supply, and output to monetary policy are determined. As well, optimal monetary policy is studied, as are the costs of infla...

The 1970s and early 1980s witnessed two main approaches to the analysis of monetary policy. The first is the early new classical approach of Lucas, based on the assumptions of rational expectations and market clearing. The second is the atheoretical econometrics of Sims’s VAR program. Both have developed: the new classical approach has been enriched through various accounts of price stickiness,...