A re-evaluation of financial targets
Keywords:Optimal monetary policy, financial targets, monetary authorities
In recent years there has been much debate concerning necessary conditions for an optimal monetary policy. In his interesting article Evaluation of Financial Targets in Six Countries, Argy presents an analytical framework in which to evaluate diverse financial targets based on a variety of assumptions. The present paper investigates the characteristics of diverse targets under alternative, more reasonable, assumptions on the preferences of the monetary authorities. Some of the limitations of Argy’s analysis are retained, but it is shown that by relaxing some of its strictures, more useful criteria for the formulation of monetary policy can be obtained.