I will comment on this briefly below. Let’s start with objectives appropriate in the closed economy context. Congress has set dual objectives for monetary policy in the Federal Reserve Act: price stability and full employment. These objectives relate directly to the performance of the domestic economy and they are also objectives that monetary policy has the ability to pursue in the closed economy setting.
2  G. Debelle and M. Plumb (2006) ‘The evolution of exchange rate policy and capital controls in Australia’, Asian Economic Papers (forthcoming). 2  BIS Review 86/2006  In summary, the operation of monetary policy in the pre-float period was significantly constrained by external considerations, and was hampered by capital flows.