The Federal Reserve Bank of St. Louis’ adjusted monetary base equals the sum of the monetary base and a reserve adjustment magnitude (RAM) that maps changes in reserve requirements into equivalent changes in the monetary base.
Is there a wage-price spiral? Are workers better off than they were? Are real wages procyclical? Economists have often used data on average wages to answer such questions. Unfortunately, the three common sources for such data—average hourly earnings, compensation per hour, and the employment cost index—appear on the surface to measure the same thing, but often give different answers.
A common objection to making price stability the primary objective of monetary policy is that, once inflation is under way, it is less costly to live with a little inflation that it is to achieve a stable price level (as proposed in Howitt’s Rule). The author assesses the conditions that Howitt’s Rule requires and shows how reduced output growth caused by inflation might dramatically affect the outcome.
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