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In contrast, the policy of maintaining a constant rate of monetarygrowth does not suffer from this problem.
The over-response of prices to persistent monetarygrowth is a standard element of rational-expectations monetary models.
If this is the case, a rise in monetarygrowth increases (decreases) the long-term growth rate in the high- (low-) growth equilibrium.
Preventing seasonality in the rate of monetarygrowth does not suffer from this problem.
We demonstrate that this conclusion can be confirmed in the monetarygrowth models as well.
First, monetarygrowth rates are closely related to the instruments of monetary policy and thus more easily controllable than inflation itself.
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