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Computational Economics

, Volume 39, Issue 1, pp 99–111 | Cite as

Manual-Control Analysis Applied to the Money Supply Control Task

  • Rodney C. Wingrove
  • Ronald E. Davis
Article
  • 74 Downloads

Abstract

The recent procedure implemented by the Federal Reserve Board to control the money supply is formulated in the form of a tracking model as used in the study of manual-control tasks. Using this model, an analysis is made to determine the effect of monetary control on the fluctuations in economic output. The results indicate that monetary control can reduce the amplitude of fluctuations at frequencies near the region of historic business cycles. However, with significant time lags in the control loop, monetary control tends to increase the amplitude of the fluctuations at the higher frequencies. The study outlines how the investigator or student can use the tools developed in the field of manual-control analysis to study the nature of economic fluctuations and to examine different strategies for stabilization.

Keywords

Monetary Policy Business Cycle Federal Reserve Money Supply Economic Dynamic 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

List of Symbols

GNP

Gross National Product

X

real GNP, constant dollars

x

rate of growth in real GNP, 100 d(logX)/dt, %/year

j

(−1)1/2

M

money supply based on M1 (dollars, currency and all checking accounts)

m

rate of growth in money supply, 100 d(logM)/dt, %/year

rm

random monetary disturbance

rx

random nonmonetary disturbance

T

time delay, year

tr

return time, year

ωn

natural frequency, rad/year

( )t

target

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Copyright information

© Springer Science+Business Media, LLC. 2011

Authors and Affiliations

  1. 1.NASA-AMES Research CenterMoffett FieldUSA
  2. 2.San Jose State UniversitySan JoseUSA

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