The Federal Reserve's new operating procedures: A post mortem

Although money stock targeting has been the strategic focus of Federal Reserve policy since the mid-1970's, operating policy — the tactics whereby the longer-run strategy is implemented over short-term intervals — has been changed by the Federal Reserve at least twice over this period. A particularly dramatic change in operating policy was announced by the Federal Reserve in October 1979. This paper provides empirical evidence that settles questions about the nature of this change and suggests that the new operating procedures may have contributed to the heightened interest rate volatility experienced over the 1979 to 1982 period.