ABSTRACT
During the fall of 1979—in the midst of a significant run from the dollar—the Board of Governors of the Federal Reserve System, under its recently appointed chairman, Paul Volcker, announced a shift of operational guidelines and objectives for the Federal Reserve’s monetary policy. This shift was toward “practical” monetarism—that is, the Federal Reserve henceforth was to use the quantity and rate change of some monetary aggregate as its proximate target for policy. The Federal Reserve would no longer be directly concerned with interest rates, money market conditions, or even the current performance of the economy.
