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Should the Fed Focus on the Role of Money in the Conduct of Monetary Policy - Research Paper Example


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Should the Fed Focus on the Role of Money in the Conduct of Monetary Policy

Using its fiscal ability to direct the supply and accessibility of money, a regime attempts to create solidity in its economy (Bordo & Filardo 510). However, there are often differences about the approaches that policymakers choose when performing financial policy (Smets 1261). The Federal Reserve currently focuses its influence on the federal funds rate to realize maximum sustainable expansion and price stability (Khan & Benolkin 8). According to Khan & Benolkin, the central funds rate entails the interest rate that a depositing body gives immediately current funds (balances at the Federal Reserve) to another body whose aim is to deposit (8). Unlike in the past, the Fed does not denote targets or monitoring ranges for monetary aggregates (Khan & Benolkin 8). Mishkin defines monetary aggregates as M1 and M2. M1 and M2 measure the total value of the money supply in an economy (Khan & Benolkin 7). M1 entails Currency, Traveler’s Checks, Demand Deposits plus Other Checkable Accounts. M2 involves Small value Time Deposits, Savings Deposits plus Money Market Deposit Accounts, and Money Market Mutual Fund Shares (Khan & Benolkin 8). In this paper, I want to argue if the Fed should focus on the role of money in the conduct of monetary policy (Khan & Benolkin 8). ...
This is possible through utilizing the aggregates as economic indicators where important parameters are under scrutiny (Bordo & Filardo 511). Since monetary policy in Federal Reserve plays a bigger role of ensuring growth sustainability

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and considerable prices, utilization of aggregates are significant for improving this state (Bordo & Filardo 510). Moreover, the Federal Reserve can conduct adequate research on the importance of monetary aggregates and change its view of aggregates to incorporate policy issues largely. The monitory aggregates are vital for governments which aim is to mark inflation because they help in altering money supply, thus affecting liquidity (Bordo & Filardo 512). The Federal Reserve can utilize the aggregates for issues such as policy stance incorporating monitoring rates of interests. When there are low inflations, the federal government can utilize the aggregates to guide monitory policy (Bordo & Filardo 511). In various occasions, interest rates can be useful in providing guidance for policy. This is possible when inflation drops and the economic measures associate prices with appropriate policies (Bordo & Filardo 511). Incorporation of monitory aggregates in the Federal Reserve would be profitable in improving economic status because open market buying can bring down interest rates to the ground level (Bordo & Filardo 512). This is possible even with no occurrence of economic stimulus (Bordo & Filardo 512). To enhance economic growth, the Federal Reserve should include aggregates. Research shows a strong relationship between various advancements in economy (Bordo & Filardo 512). A vivid study is fundamental in order to determine the significance of aggregates in various economies. This


Name Professor Course Date Should the Fed Focus on the Role of Money in the Conduct of Monetary Policy? Introduction When investors are ready to endow their money into projects, it is imperative that they include a clear picture about future economic development (Bordo & Filardo 510)…
Should the Fed Focus on the Role of Money in the Conduct of Monetary Policy
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