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May 1969

Controlling Money

by Allan H. Meltzer

This paper considers the question of the appropriate definition of money and discusses the ways that the Federal Reserve can control the money stock consistent with achieving its short-term money market objectives. Professor Meltzer advocates the use of the growth of the money stock as an indicator of the influence of monetary actions on economic activity, and then describes the manner in which the desired growth rate of money can be achieved through the Federal Reserve’s control of the monetary base.