DIVORCING MONEY FROM MONETARY POLICY by ProQuest

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									Todd Keister, Antoine Martin, and James McAndrews




Divorcing Money
from Monetary Policy

• Many central banks operate in a way that                                     1. Introduction
   creates a tight link between money and
   monetary policy, as the supply of reserves
   must be set precisely in order to implement
   the target interest rate.
                                                                            M       onetary policy has traditionally been viewed as the
                                                                                     process by which a central bank uses its influence over
                                                                            the supply of money to promote its economic objectives. For
                                                                            example, Milton Friedman (1959, p. 24) defined the tools of
• Because reserves play other key roles in the                              monetary policy to 
								
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