Staff Report 111

Monetary Targeting in a Dynamic Macro Model

William Roberds

Published July 1, 1987

The consequences of a straightforward monetary targeting scheme are examined for a simple dynamic macro model. The notion of “targeting” used is the strategic one introduced by Rogoff (1985). Numerical calculations are used to demonstrate that for the model under consideration, monetary targeting is likely to lead to a deterioration of policy performance. These examples cast doubt upon the general efficacy of simple targeting schemes in dynamic rational expectations models.

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