Interest rate targeting in monetary policy confuses public understanding of control.
The article discusses how the quantity theory of money can be applied to modern monetary policy, even when interest rates are used as the main tool instead of controlling reserves directly. It explains how changes in the price level can be understood by equating the demand for money with the supply of money. The researchers propose a change in monetary policy procedures to help achieve price stability by addressing concerns about the confusion between control over nominal and real variables.