Using a monthly model of the economy, containing a detailed financial sector, various monetary reforms are evaluated in a stochastic setting. The setting is stochastic because parameters must be estimated from finite data sets and because unexplained residuals exist. The objective function is a single-period, simple quadratic function in income. The problem then reduces to finding the opportunity locus (mean-variance curve) corresponding to each reform; the more effective the reform the more favorable the mean-variance tradeoff. The general finding is that most of the reforms considered are effective, but their impact is not very significant.
Bibliographical noteFunding Information:
underlying my thesis and the paper was generally financed by the Federal Reserve Bank of Minneapolis. I am indebted to James Henderson, John Kareken, and especially Nell Walla,:e for their many helpful comments. I accept the sole responsibility for any remaining errors. tFor attempts to evaluate specific reforms see Smith (1967), Poole and Licberman (1972}, Benston (1969), Dewdld (1971) and Tobin and Brainard (1963).
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