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Long-term Contracts and the Optimal Choice of Monetary Instruments

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Authors
Ahn, C. W.; Jung, W. S.
Issue Date
1991
Publisher
Seoul Journal of Economics
Citation
Seoul Journal of Economics 4 (No. 2 1991): 123-140
Keywords
IS-LM; money stock policy; instrument choice
Abstract
This paper studies the implications of long-term contracts for the optimal choice of a monetary instrument. it shows that an increase in the (average) contract length of the economy enables the monetary authority to reduce output variance under either instrument, the interest rate or the money stock. However, an interest rate policy seems to reduce the variance proportionately more than a money stock policy. Nevertheless, the choice of the optimal instrument is invariant with respect to the contract length.
ISSN
1225-0279
Language
English
URI
http://hdl.handle.net/10371/911
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College of Social Sciences (사회과학대학)Institute of Economics Research (경제연구소)Seoul Journal of EconomicsSeoul Journal of Economics vol.04(2) (Summer 1991)
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