This paper examines the choice of monetary policy in
response to seasonal fluctuations in the economy. It discusses
the costs and benefits of smoothing interest rates over the
seasons, which has been the Fed's policy since its founding in
1914, and presents simulations suggesting how the economy would
behave under the alternative policy of stabilizing the money
stock. Finally, it presents evidence that the smoothing of
interest rates in 1914 changed the seasonal business cycle.
*Published:
Carnegie-Rochester Conference Series on Public Policy, Vol. 34, pp. 41-69,(Spring 1991).
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