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Long Run Targets And Fomc Policy Decisions, Susan B. Peterson

Robins School of Business White Paper Series, 1980-2022

Monetarists have long been advising policy makers to conform policy decisions to a rule which would set the long-run monetary growth at a rate consistent with real economic growth. The contention is that variability in the rate of growth of the money supply, combined with excessive rates of growth, result in economic havoc accompanied by high rates of inflation and that attempts to employ discretionary counter-cyclical monetary policy are destabilizing.

This paper analyzes monetary policy decisions in the years 1980-83 in an attempt to determine the weight given to meeting the announced long-run targets recognizing that departures from that goal …