Wren-Lewis, S., (2014), “How the ECB could be Radical by being Old Fashioned”, Social Europe Journal, 20 January.
Forward commitment could be sold not as a radical new policy, but a return to a very old one: money targeting. The one major central bank that did maintain a money targeting policy for more than a few years was the Bundesbank.
Why is money targeting like a forward commitment policy? Because the level of the money stock is closely related to the level of nominal income. So having a target path for the stock of money is like having a target path for nominal income. And as I suggested above, having a target for nominal income is one way of implementing a forward commitment policy.
Relevant Posts
- Drudi, Francesco, Durre, Alain, Paolo Mongelli, Francesco, (2012),‘The Interplay of Economic Reforms and Monetary Policy: The Case of the Eurozone’, Journal of Common Market Studies, Vol. 50, Issue 6, p.p. 881–898.
- Coppola, F., (2013), “The ECB rate cut was driven by the needs of Germany, not the needs of the Eurozone”, LSE European Politics and Policy Blog, 19 November.
- Wolf, G., (2013), “Governments must follow the ECB’s rate cut with policy action”, Bruegel, 13 November.
- Wolf, M., (2013), “Why Draghi was right to cut rates”, The Financial Times, 12 November.