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Research Papers in Economics

M n t r  p l     bj  t v  
f r   82
  r   nt t  th    ll E pl    nt  nd   l n  d Gr  th
A t  f    8 (   phr        n  A t , th     rd  f G v rn r 
   r    r d t  r p rt t  th  C n r    t        h    r  t 
 nn  l t r  t  f r th   r  th  f   n    nd  r d t  nd h  
  h  v   nt  f th    t r  t  r l t   t  th   d  n  tr t  n  
   n        l .  h  f ll   n   rt  l    n   t   f        r   f
th    d   r r p rt pl   th  t  t   n   f   d r l      rv 
   rd Ch  r  n    l A.   l   r b f r  th  C n r     n   l   f
th      r.
M n t r  p l     n   82  nd   8 
 h r        l  r n  d t d   t  pr   t  h  h r
l v l   f pr d  t  n  nd   pl    nt  n   r
   n   .  h   bj  t v   f   d r l     rv 
p l       t   r  t   n  nv r n  nt   nd   v 
t     t  n d r   v r   n b   n      t v t 
 h l     nt  n n  th  f n n   l d    pl n 
n  d d t  r  t r  r    n bl  pr     t b l t .
 h   r  th  f   n    nd  r d t  n   82
 h   nn  l t r  t  f r th    n t r 
   r   t   r p rt d t  C n r     n   br  r 
  r   h   n t  b    n   t nt   th   nt n  d
r  tr  nt  n th   r  th  f   n    nd  r d t
 n  rd r t   x rt    t  n d d  n  rd pr   
  r   n  nfl t  n. At th       t   , th   
t r  t    r   xp  t d t  r   lt  n   ff    nt
  n    r  th t    pp rt  n  pt rn  n     
n       t v t .
At  t    l     t n , th    d r l Op n
M r  t C    tt     n l d d th t    h n  
 n th  pr v    l   nn  n  d t r  t      n t
  rr nt d  t th   t   .          f th  t n 
d n   f r th  d   nd f r   n   t  r n
 tr n   n  v r     n th  f r t h lf,  nd  l  
r  p nd n  t      n r     n l b d  t r   l  
t  n,   r f l   n  d r t  n       v n t  th 
    t  n  f  h th r      r    n   f th 
t r  t       n  rd r.     v r, th   v  l bl 
 v d n   d d n t       t th t   l r    n r    
 n th  r n        j  t f  d   nd      ll  h n  
 n th  r n       ld h v  r pr   nt d  
d  r    f "f n  t n n " th t  pp  r d  n  n 
   t nt   th th  d  r    f  n  rt  nt    r 
r ntl    rr  nd n  th  pr      r l t  n h p  f
  n   t   th r    n     v r  bl  .     
 v r, th  C    tt     n l d d, b   d  n
  rr nt  v d n  , th t  r  th th      r
 r  nd th  t p  f th  r n    f r th  v r    
   r   t      ld b      pt bl .
 h  C    tt    l     r  d th t p    bl 
 h ft   n th  d   nd f r l    d t     ht r  
   r    r  th n  rd n r   l   nt   f fl x b l 
 t   nd j d   nt  n        n   ppr pr  t 
n  d  f r   n    n th    nth   h  d. In th 
n  r t r ,      r d  r  th  f th     r  
  t       b   ff  t d b  th   n     t x
r d  t  n  th t     rr d  n   l   ,    t  f 
l v n   n r       n      l     r t  b n f t ,  nd
b  th   n   n  d ff   lt     f     r t l     
   nt n  f r      n l   v   nt   n th 
  n    t   .   t   r  f nd   nt ll ,  t   
 n l  r t   h t d  r   b   n       nd h     
h ld    ll   nt n   t     h t  h ld  n    ll 
l r   pr    t  n r  l    d b l n   .    th 
 xt nt th   v d n         t  th t r l t v l 
 tr n  pr    t  n r  d   nd  f r   n  
p r   t,  r  th  f th     r   t        h t
 b v  th  r t r  t d r n       ld b  t l r 
 t d f r   t     nd  t ll    ld b    n   t nt
  th th   OMC     n r l p l    thr  t.
  d r l     rv    n   f Ch     	    n     f   n t r   r  th   82  
  82 pl nn d
QI  8  QI  82
  82   t  l
QI  8  Q   82
  82   t  l
QI  8    n   82
  8 
QI  l v l  
M  2  2 t      2 p r  nt 6.8 p r  nt  .6 p r  nt 4 6. 
M2 6 t    p r  nt  .  p r  nt  .4 p r  nt  80 .4
M  6  2 t     2 p r  nt  .8 p r  nt  .  p r  nt 2   . 
C    r   l
b n   r d t 2 6 t    p r  nt 8.  p r  nt 8.0 p r  nt   2 . 
   ll  n   f d ll r ,      n ll   dj  t d.
 M     th       f   rr n   h ld b  th  p bl  , pl   tr v l r    h    , pl   d   nd d p   t ,
pl    th r  h    bl  d p   t  ( . ., n   t  bl   rd r  f   thdr   l ( OW       nt ,   t   t  
tr n f r   rv    (A S       nt ,  nd  r d t  n  n  h r  dr ft      nt . 
M2    M  pl     v n    nd    ll d n   n t  n t    d p   t , pl    h r    n   n     r  t
  t  l f nd  ( th r th n th    r  tr  t d t   n t t t  n l  nv  t r  , pl    v rn  ht r p r h   
  r    nt   nd E r d ll r .
M     M2 pl   l r   t    d p   t   t  ll d p   t r   n t t t  n , l r   d n   n t  n t r 
r p r h      r    nt ,  nd  h r    n   n     r  t   t  l f nd  r  tr  t d t   n t t t  n l
 nv  t r .
  n   r d t    t t l l  n   nd  nv  t  nt   f      r   l b n  .
2         f th   ntr d  t  n  f Int rn t  n l   n  n      l t    (I    , th  b n   r d t d t 
b   nn n   n      b r   8   r  n t    p r bl  t    rl  r d t .  h  , th  t r  t f r   82    
 t t d  n t r    f  r  th fr   th   v r    l v l  f      b r   8   nd   n  r    82 ( h  n  n th 
l  t   l  n  t  th   v r    l v l  n th  f  rth    rt r  f   82,    th t th   n t  l  h ft  f     t  t 
I    th t     rr d  t th   nd  f th     r    ld n t h v      j r   p  t  n th  p tt rn  f  r  th.
A t  l  r  th r t   f r b n   r d t  r    l  l t d fr   th       b r   n  r  b   .
 h  p l     f f r  r  tr  nt  n   n t r 
 r  th h     ntr b t d   p rt ntl  t  th 
r   nt pr  r    t   rd r d   n   nfl t  n.
  t  h n  nfl t  n r     t tr nd  r    n
 ntr n h d, th  pr       f  l   n    n t r 
 r  th   n  nt  l    n      nd f n n   l
 tr     .  h     tr  n —r fl  t d  n r d   d
pr f t , l    d t  pr bl   ,  nd b l n    h  t
pr    r  —pl    p rt   l r h rd h p   n  n 
d  tr    th t d p nd h  v l   n  r d t   r 
  t     h      n tr  t  n, b   n        p 
  nt,  nd   n    r d r bl  .
Unf rt n t l , th     tr        nn t b 
    l  r   d  d thr   h f  t r   n  
 r  th.  h      d  t   ff  t    ht b  l   r
 nt r  t r t  ,   p    ll   n  h rt t r    r 
  t . In t   , h   v r,    h  n  tt  pt
   ld f  nd r,   b dd n   nfl t  n  nd  x 
p  t t  n   f  nfl t  n  v n   r  d  pl   nt 
th  n t  n      n        t  .  h  pr   nt
 nd pr  p  t v  pr    r    n f n n   l   r 
  t   r  ntl  n  d t  b      d n t b  r l x n 
d    pl n   n   n    r  th, b t b  th   d p 
t  n  f p l      th t   ll  n  r    l   r  nd
d  l n n  f d r l d f   t. M r  v r,   r t rn
t  f n n   l h  lth   ll r    r  th   d pt  n
 f   r  pr d nt  r d t pr  t      n th  p rt
 f pr v t  b rr   r   nd l nd r   l   .
4	 E  n       r p  t v          8        80
 
0
 
  nt t v  r n    f r   8 
     n   h  d t    8   nd b   nd, th 
 OMC r    n       tt d t  r  tr  n n 
  n    r  th  n  rd r t    h  v     t  n d
n n nfl t  n r     n      xp n   n. At  t 
  l     t n , th   OMC f lt th t th  r n   
n    n  ff  t    ld r    n    pr l   n r 
t r  t  f r   8 .         th    n t r     r  
  t    n   82   ll l   l  b   l    t  th   pp r
 nd   f th  r r n   ,  r p rh p   v n      
 h t  b v  th  , th  pr l   n r    8  t r  t 
 r  f ll    n   t nt   th   r d  t  n  n th 
  t  l  r  th  f   n    n   8 .
  nt t v  r n     f   n t r   r  th   8 
(    d  n QI  82 t  QI  8  
M 
	
2  2 t     2 p r  nt
M2
	
6 t    p r  nt
M 
	
6  2 t     2 p r  nt
C    r   l b n   r d t	 6 t    p r  nt
In l  ht  f th   n    l  n  rt  nt    r 
r  nd n  th     n    , f n n   l,  nd b d  t 
 r    tl   , th   OMC  tr    d th  t nt t v 
n t r   f  t    8  t r  t . On th   n  h nd,
 xp r  n    tr n l        t  th t,   th     
n       t v t   n  n  p  rd tr nd, pr     
t  n r    t v   f r h ld n  l    d b l n   
 h  ld b   n t  f d ,   ntr b t n  t    r p d
r     n th  v l   t   f   n  . M r  v r, r    
l t r    t  n  b  th    p   t r  In t t t  n 
  r   l t  n C    tt   th t  n r     th 
   p t t v   pp  l  f d p   t  n tr   nt —
     ll    th    r    d  pr  d      f  nn v  
t v     h   n     nt t  hn     ,    h   
"    p"      nt — l      ld r d    th 
d   nd f r   n   r l t v  t   n      nd
 nt r  t r t  . On th   th r h nd, th  l n 
 p  rd tr nd  n th  v l   t   f   n     n  
th     0  t    pl     n  n  nv r n  nt  f
r   n   nfl t  n  nd h  h r n   n l  nt r  t
r t   th t pr v d d  n  nt v   f r    n   z 
 n   n   n   h ld n       th     n  nt v  
r   d , th   ttr  t v n     f    h h ld n  
    b   nh n  d  nd   r    n       b 
h ld r l t v  t  th  l v l  f b   n      t v t .
  d r l     rv    n   f Ch     
 h    tl    f r th     n   
 h     n     t   d   r  pp  r  t  h v 
l v l d  ff f ll   n    z bl  d  l n   l  t f ll
 nd   nt r. C n   pt  n h    tr n th n d,
  th r t  l   l    p    n f   ntl   n th      nd
   rt r.      nd  x  t n  h      l   h v 
  nt n  d t  fl  t  t   t d pr    d l v l ,
b t h    n   t rt  n n th l    h v   d  d
 p  rd. In th  b   n       t r,   b t nt  l
pr  r    h   b  n   d   n   r  n   ff  x    
 nv nt r   ,  nd th  r t   f l    d t  n  p 
p  r  t  h v  d  l n d. On th  n   t v    d ,
h   v r, pl nt  nd     p  nt  p nd n ,
 h  h t p   ll  l     n  pt rn  n  v r ll   t v 
 t ,     t ll d pr    d.  h  tr nd  n  xp rt
d   nd  l     nt n    t  b    dr    n th 
   n    r fl  t n  th  d ll r    tr n th  nd
        n       t v t   br  d.
An  v l  t  n  f th  b l n    f     
n     f r     nd   t   th t  n  pt rn  n     
n       t v t     h  hl  l   l   n th      nd
h lf  f   82. M n t r   r  th  l n  th  l n  
t r  t d b  th   OMC  h  ld        d t 
th    xp n   n  n r  l G  ,   v n th   n 
 r       n v l   t  th t t p   ll      r   rl   n
     l   l r   v r ,  nd  b  nt  n  ppr    bl 
r   r  n    f  nfl t  n.  h   0 p r  nt   t  n
 n     t x r t   th t   nt  nt   ff  t   l      
b   t n  d  p   bl  p r  n l  n      nd
   l G  
 80 
40 
  	  	 I	 I	 I 
    	    8	     	   80	   8 	   82
 h  ld r  nf r   th   r  th  n   n    r
 p nd n . G v n th    pr v d  nv nt r    t 
  t  n,  n    z bl   n r      n   n    r
 p nd n   h  ld,  n t rn, b  r fl  t d  n n  
 rd r   nd   p    p  n pr d  t  n.  h    n 
t n  n  r     n d f n    p nd n   nd th       
   t d pr v t   nv  t  nt   tl    n  d d f r
th  pr d  t  n  f d f n       p  nt   ll b 
 n th r  l   nt   pp rt n  r  l G    r  th.
  r n   t   n t  l ph   , th   xp n   n    l   l 
t  b    r  h  v l    n  ntr t d  n   n    r
 p nd n  th n  n p  t b   n       l      rr nt
pr    r    n f n n   l   r  t   nd l    d t 
 tr  n       nh b t th  r   v r   n r   d nt  l
 nd b   n     nv  t  nt.
 h   x  ll nt pr    p rf r  n      f r
th      r h   b  n h lp d b   l    d   nd
 nd  x  pt  n ll  f v r bl   n r    nd f  d
  ppl  d v l p  nt .   r th t r    n, th 
r   rd d r t   f  nfl t  n     b  h  h r  n
th      nd h lf  f th     r.     v r, pr   
p  t   pp  r  x  ll nt f r   nt n  n  th 
d  ntr nd  n th   nd rl  n  r t   f  nfl t  n.
 h r  h   b  n    n f   nt pr  r     n  l   
 n  th  r     n l b r    p n  t  n,  nd    
pr v   nt  n  nd rl  n     t pr    r  
 h  ld   nt n    v r th  b l n    f th     r.
Un t l b r    t   l    r  l   l  t  b  h ld
d  n b       l   l r b  nd  n pr d  t v t 
 r  th      tp t r   v r . M r  v r, l   r
 nfl t  n   ll   ntr b t  t     ll r    t  f 
l v n        dj  t  nt ,  h  h   ll   d r t 
   t pr    r   f rth r.
A  r t   l f  t r  nfl  n  n  th     p    
t  n  nd  tr n th  f th   xp n   n  n     
n       t v t   v r th  n xt    r  nd   h lf
  ll b  th   xt nt t   h  h pr    r    n f n n 
   l   r  t    d r t .  h  ,  n t rn, d p nd 
  p rt ntl   n th  pr  r      d   n f rth r
r d   n   nfl t  n r  pr    r  . A d  r      n
 nfl t  n    ld t    pr    r   ff f n n   l
  r  t   n t       .   r t,  l   r  nfl t  n
  ll l  d t    r d   d  r  th  n tr n   t  n 
d   nd  f r   n  ,   v n  n  p rt   l r
l v l  f r  l   t v t . S   nd, f rth r pr  r   
 n   rb n   nfl t  n   ll h lp l   r l n  t r 
 nt r  t r t   b  r d   n  th   nfl t  n pr  
       nt  n d  n n   n l  nt r  t r t  .
An th r  r    l  nfl  n    n f n n   l
C n    r pr    
p r  nt  h n   fr    nd  f pr v     p r  d
  
 nn  l r t 
C I  x l d n  f  d,  n r  ,
 nd h     n r h p
 0
C I
 
0
    
	
   8
  r  t   nd th    n th  n t r   f th   xp n 
   n  n   8    ll b  th  f d r l b d  t r 
d      n  th t  r    d   n     n    nth .
 h  b d  t r   l t  n th t     r   ntl 
p    d b  th         nd S n t         n tr   
t v  f r t  t p  n r d   n  b d  t d f   t    
th     n    r   v r , b t  ppr pr  t  n  nd
r v n   l    l t  n    n  d d t    pl   nt
th   r   l t  n.     th  b d  t pr       n 
  d r l   v rn  nt b rr   n 
b ll  n d ll r 
 20
     n ll   dj  t d  nn  l r t 
I
    	   80	   8     . M  
  82
6	 E  n       r p  t v   OMC    b r      n     pr j  t  n 
A t  l 	  r j  t d
  8 	   82	   8 
Ch n   , f  rth
   rt r t  f  rth
   rt r, p r  nt
Av r    l v l
 n th  f  rth
   rt r, p r  nt
    n l G  
   l G  
G     fl t r
Un  pl    nt
r t 
 .6	    2 t     2
0. 	   2 t     2
8. 	 4  4 t  6
  t     2
2  2 t  4
4 t     4
8. 	   t     4	 8  2 t     2
     d  n r v   d G   d t  th t   r  p bl  h d  ft r th  f ll    phr        n  r p rt    
  b  tt d.
f ld    ll d t r  n  f t r   r d t d   nd  b 
th  f d r l   v rn  nt  nd th   th   xt nt
t   h  h d f   t    ll pr   pt th  n t   v n  
  n r t d b  th  pr v t     n   . A  tr n 
pr  r    f b d  t r  tr  nt    ld   n   z 
pr    r    n f n n   l   r  t   nd th r b 
 nh n   th  pr  p  t  f r     r  v   r   
r   v r   n h   b  ld n , b   n    f x d
 nv  t  nt,  nd  th r  r d t d p nd nt
   t r .
In        n  th     n       tl   , th 
 nd v d  l    b r   f th   OMC h v    d 
pr j  t  n  f r    n     p rf r  n   th t
  n r ll  f ll   th n th  r n     n th  t bl 
 b v . In  dd t  n t  th    n t r  t r  t 
d       d  b v , th    pr j  t  n        
th t th  f d r l b d  t   ll b  p t  n      r  
th t  v r t      ll r   lt  n    n f   nt r d   
t  n   n th  f d r l d f   t.
     n   h  d, th  C    tt       
b r , l    th   d  n  tr t  n  nd th  C n 
 r   , f r       nt n  d    n      xp n 
   n  n   8 , b t   rr ntl   nt   p t    l   
r p d r t   f pr     n r      nd      h t
 l   r r  l  r  th th n th       pt  n 
 nd rl  n  th  b d  t.  h    n t r  t r  t 
t nt t v l    t f r   8  — h  h   ll b  r  
v    d   rl  n xt    r—   ld   pl ,  nd r
th  b d  t r       pt  n , r l t v l  r p d
 r  th  n v l   t .
  d r l     rv    n   f Ch     	  

Monetary policy objectives for 1982

http://www.chicagofed.org/digital_assets/publications/economic_perspectives/1982/ep_fall1982_part1.pdf

Monetary policy objectives for 1982

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Research Papers in Economics