17 Monetary Policy, Part 2-2

17 Monetary Policy, Part 2-2 - Agenda Monetary Policy...

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1 17-1 Monetary Policy and the Federal Reserve System, Part 2 17-2 Agenda •Mon e t a ry Po l i cy Con t ro l ¾ Intermediate targets ¾ Making monetary policy in practice •Ru l e s v e r su s D i
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2 17-5 Monetary Policy Control •In t e rm ed i a t e t a rg e t s : ¾ The Fed cannot target both the money supply and the Fed funds rate simultaneously. •Suppo se bo th the money supp ly and the Fed fund s ra te were above target, so the Fed needs to lower them. •S ince a dec
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17-9 Monetary Policy Control •In t e rm ed i a t e t a rg e t s : ¾ Suppose a shock shifts the IS curve to the right. •I f the Fed we re to ma in ta in the rea l in te re s t ra te , i t
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17 Monetary Policy, Part 2-2 - Agenda Monetary Policy...

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