Review

Over the past several years, the Federal System has paid increased attention to monetary aggregates as a means to achieve the ultimate national employment and price goals. Evaluation and further development of this process has been hindered, however, by a continuing controversy about which monetary aggregate is appropriate. Specifically, the question concerning the efficacy of monetary actions often becomes lost in discussions about whether M1 or M2 or some other monetary aggregate is giving the best information about the monetary influences being transmitted to the economy.

Debt-management policies of the U.S. Government are actions which affect the composition of the publicly held Federal debt. Such actions include operations of both the U.S. Treasury and the Federal Reserve. As a macroeconomic policy tool, discretionary debt-management policy attempts to affect economic activity in a specific way by altering the maturity structure of the Government’s debt. The effectiveness of such a policy depends upon the extent to which changes in the composition of the debt affect the structure of interest rates, and the extent to which changes in the structure of interest rates affect economic activity.