A Note on the Intermediate Targets of Monetary Policy

Abstract

Over recent years much of the debate on monetary policy has centred on the problem of intermediate targets and whether set rules should be adopted in this area and the targets announced beforehand by the monetary authorities. Part of the discussions have been largely influenced by the tenets of the so-called “monetarist” school and therefore reveal a bias in favour of targets framed in terms of monetary aggregates rather than interest rates and a sceptical view of “active” use of monetary tools and, more generally, of stabilization policies. This ascendancy of the monetarist doctrine is to some extent due to a combination of intellectual vogues and the beliefs of a new generation of academics, as well as to the reappearance of inflation among the foremost problems of economic policy, in a form whose gravity has escaped the dominant “New Economics” school, and defeated its attempts to evolve a remedy based on concrete action.

This paper was originally prepared for a seminar organized in Paris by the Banque de France, April 1977.