IN RECENT YEARS I have become more perplexed and more skeptical about the use of monetary policy as a tool for very short-run stabilization. At present the profession has one body of analysis that relies upon an elaborated Keynesian approach to outline the link between changes in monetary policy and changes in real economic activity. This linkage runs from open market operations to bank reserves and then through the money supply and other factors to short-term interest rates. Movements in short term rates are translated into changes in long-term rates through a variety of channels. Long-term rates in turn provide the link to business investment, the stock market, consumption, and homebuilding.