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Monetarism and the Ml Target

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The Federal Reserve has once again decreased emphasis on the Ml target as a guide for short-run policy actions. In the first half of 1986, Ml growth averaged 11.8 percent, while nominal gross national product (GNP) growth averaged only 4.6 percent and inflation continued to be lower than expected. Policymakers and economists, including leading monetarists, argue that Ml is no longer an appropriate short-run guide for monetary policy.

The Federal Reserve has once again decreased emphasis on the Ml target as a guide for short-run policy actions. In the first half of 1986, Ml growth averaged 11.8 percent, while nominal gross national product (GNP) growth averaged only 4.6 percent and inflation continued to be lower than expected. Policymakers and economists, including leading monetarists, argue that Ml is no longer an appropriate short-run guide for monetary policy.


Suggested citation: Gavin, William T., 1986. "Monetarism and the M1 Target," Federal Reserve Bank of Cleveland, Economic Commentary, 10.01.1986.

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