Economics, Econometrics and Finance
4 years ago

Central banks' focus on interest rates may lead to higher real rates.

RePEc: Research Papers in Economics
Real Interest Rates and Central Bank Operating Procedures
Matthew B. Canzoneri, Harris Dellas

Paper Summary

Central banks shifted focus from monetary aggregates to interest rates, causing real interest rates to rise and prices to be less stable. By targeting M1 instead of nominal interest rates, real interest rates could be lower by 50-100 basis points and prices could be 30-40% more stable.

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