Economic Review

1989

 
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Sep/Oct, 1989

M2 and Monetary Policy

Robert L. Hetzel

Consistent with its mandate in the Humphrey-Hawkins Act of 1978, the Federal Reserve System each year sets a calendar-year target for the monetary aggregate M2. This paper examines the effect of specifying the M2 target as a multiyear trend line and concludes that an operationally significant target for M2 in the form of a trend line that rises at three percent per year will eliminate inflation.



Our Research Focus: Inflation & Monetary Policy

Topics: Inflation
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