ABSTRACT
This chapter attempts to evaluate the costs or benefits of relying on forecasts when choosing monetary aggregate policy actions. From the earliest systematic writings on monetary theory, writers have observed a relation between money and the price level. Neutrality remains a central proposition for all monetary theory. In principle, government can increase economic welfare by providing the optimal rate of monetary expansion and inflation. For the United States, there are a large number of public and private forecasts of quarterly and annual data. An international rule for compatible monetary policies creates a public good. Smaller countries could choose to import enhanced price and exchange rate stability by fixing their exchange rate to a basket of the currencies of major countries or to one of those currencies. The solution is to make the monetary authority accountable for its actions without making it subservient to elected officials.
