TY  - JOUR
AU  - Christiano,Lawrence
AU  - Motto,Roberto
AU  - Rostagno,Massimo
TI  - Two Reasons Why Money and Credit May be Useful in Monetary Policy
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13502
PY  - 2007
Y2  - October 2007
UR  - http://www.nber.org/papers/w13502
L1  - http://www.nber.org/papers/w13502.pdf
N1  - Author contact info:
Lawrence Christiano
Department of Economics
Northwestern University
2001 Sheridan Road
Evanston, IL 60208
Tel: 847/491-8231
Fax: 847/491-7001
E-Mail: l-christiano@northwestern.edu

Roberto Motto
European Central Bank
Postfach 16 03 19
D-60066 Frankfurt am Main
GERMANY
E-Mail: roberto.motto@ecb.int

Massimo Rostagno
European Central Bank
Postfach 16-03-19
D-60066 Frankfurt am Main
GERMANY
E-Mail: Massimo.Rostagno@ecb.int
AB  - We describe two examples which illustrate in different ways how money and credit may be useful in the conduct of monetary policy. Our first example shows how monitoring money and credit can help anchor private sector expectations about inflation. Our second example shows that a monetary policy that focuses too narrowly on inflation may inadvertently contribute to welfare-reducing boom-bust cycles in real and financial variables. The example is of some interest because it is based on a monetary policy rule fit to aggregate data. We show that a policy of monetary tightening when credit growth is strong can mitigate the problems identified in our second example.
ER  -