A Monetary Impulse Measure for Medium-Term Policy Analysis

By Bennett T. McCallum, Monica Hargraves

December 1, 1994

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Bennett T. McCallum, and Monica Hargraves. A Monetary Impulse Measure for Medium-Term Policy Analysis, (USA: International Monetary Fund, 1994) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The paper presents a measure of monetary impulse that is intended to reflect the medium-term inflationary implications of a nation’s current monetary policy. The measure consists of the growth rate of the monetary base, adjusted for reserve requirement changes and augmented by an implicit forecast of future growth rates of base velocity. Time series plots of the impulse measure for the G-7 countries are presented, and are compared with plots of inflation and of two alternative monetary indicators—the yield curve slope and the growth rate of a broad monetary aggregate. The impulse measure serves well as a medium-term indicator of future inflation, and on balance matches or outperforms the alternative indicators.

Subject: Bond yields, Financial institutions, Inflation, Monetary aggregates, Monetary base, Money, Prices, Sovereign bonds

Keywords: Bond yields, CPI inflation rate, IM value, Impulse measure, Inflation, Inflation band, Inflation rate, Monetary aggregates, Monetary base, Monetary base growth, Monetary policy, Monetary policy action, Monetary policy stance, Sovereign bonds, WP

Publication Details

Pages:

34
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1994/146
Stock No:

WPIEA1461994
ISBN:

9781451856583
ISSN:

1018-5941

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