Econ310_Notes20101102 - 004 Definitions Econ310...

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Monetary Policy Targets (11/2/2010) Econ 310- 004 Definitions policy instrument  – variable that responds to tools and indicates stance (easy, tight) of  monetary policy intermediate target  – stands between the instruments and goals of monetary policy monetary targeting  – central bank announces targets for annual growth rate of a monetary  aggregate real bills doctrine  – creation of paper or credit money will not cause inflation as long as the  money is issued in exchange for sufficient security (thoroughly discredited) procyclical  – economic quantity positively correlated with state of economy; up in booms, down  in busts countercyclical  – economic quantity negatively correlated with state of economy automatic stabilizers  – policies that stimulate or depress the economy when necessary without  any deliberate policy change (designed to reduce lags) rules  – policymakers announce in advance how policy will respond in various situations, and  commit themselves to following through discretion  – as events occur and circumstances change, policymakers use their judgment and  apply whatever policies seem appropriate at the time time inconsistency  – policymakers have an incentive to renege on a  previously announced policy once others act Equations i ff  =   + 2 + 0.5(  – 2) + 0.5[100(y – y π π n )/y n ] Taylor Rule
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This note was uploaded on 01/26/2011 for the course ECON 310 taught by Professor Staff during the Fall '08 term at George Mason.

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Econ310_Notes20101102 - 004 Definitions Econ310...

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