Money Stock Control and Inflation Targeting in Germany

1. Introduction.- 1.1 Intermediate strategies for monetary policy.- 1.2 The role of the Bundesbank.- 1.3 The methodological framework.- 2. Measuring monetary policy: Operating procedures and intermediate strategies.- 2.1 The conduct of monetary policy in Germany.- 2.2 Operating procedures and money supply.- 2.3 A note on the identifiability of money demand.- 2.4 A note on the identifiability of autonomous monetary policy actions.- 2.5 Evidence from recent empirical analyses of German monetary policy.- 3. Theoretical framework.- 3.1 Basic considerations.- 3.2 Interest rate operating procedure (from 1985 on).- 3.3 An alternative approach: reserves targeting.- 3.4 Discount window borrowing procedure (1975-1984).- 3.5 Concluding remarks.- 4. Analysis of time series using linear state space models.- 4.1 Basic concepts.- 4.2 The linear state space model.- 4.3 Specific properties of the linear model.- 4.4 Signal extraction using the Kalman filter.- 4.5 Structural analysis.- 4.6 Model selection and estimation.- 4.7 Modelling nonstationary time series and common stochastic trends.- 5. Empirical implementation and results.- 5.1 Is a multiplier approach adequate to model German money supply?.- 5.2 Monetary targeting and the business cycle.- 5.3 A quantity theory based approach to inflation targeting.- 6. Conclusions.- 6.1 Methodological remarks.- 6.2 Money stock control and the day-to-day conduct of monetary policy.- 6.3 Money stock control and inflation targeting in Germany.- 6.4 Prospects for the ECB's monetary policy strategy.- List of figures.- List of tables.- A. GAUSS-programs.- A.1 Estimation of balanced state space model.- A.2 Obtaining in-sample forecasts using the Kalman filter.- A.3 Calculation of impulse-responses.- A.4 Calculation of forecast-errorvariance decompositions.- A.6 Aoki C-Test for model specification.