JOURNAL ARTICLE
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Preisstabilisierende Geldpolitik
Credit and Capital Markets – Kredit und Kapital, Vol. 19 (1986), Iss. 1 : pp. 58–75
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Gustav-Adolf Horn, Konstanz
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Abstract
Price-stabilizing Monetary Policy
The present article dealls with the question of whether a regulatory policy of the central bank aimed at price stabilization can be successful when economic entities have rational expectations. A further line of inquiry is how far the results change when price movements are sluggish, i.e., not oriented exclusively to clearing the market. One result that can be affirmed is that the price-stabilizing monetary policy is successful regardless of the inertia of prices. Monetary policy has real effects, however, only when the price-system tends to clear the market. The assumption of constantly cleared markets thus proves essential for the neutrality of policy rules. Furthermore, the real effectiveness of monetary policy in this field is not based, in contrast to some monetaristic notions, on the deception of economic entities on account of the rational expectations. Hence, solely the disequilibrium-generating sluggishness of price movements is the basis for non-neutrality of central bank policy