Predicting the Effects Of Monetary Policy

Despite the long history of the dispute, choices do not have to be made between rules and discretion but between rules that are less rather than more complicated, and more rather than less open to scrutiny and evaluation. Steady increases in the quantity of money will produce more desirable economic consequences than will variable increases, and changes in the stock of money are more reliable indicators of monetary policy than are changes in interest rates. Indeed, major errors in monetary policy stem from using interest rates as an indicator of monetary policy.