Category Archives: Monetary Policy

Today’s NPR Morning Edition presented two sides to the question “Does The Economy Need A Little Inflation?”  By “a little” they mean 5 percent per year for a few years.   The former IMF chief economist and Harvard professor Ken Rogoff argued in … Continue reading →

The Fed’s dual mandate of “maximum employment” and “stable prices” is in the news again. At the recent presidential debate, the major Republican candidates made the case for repealing the dual mandate, while the President of the Federal Reserve Bank of Chicago, Charles Evans, made … Continue reading →

Quantitative Easing (both I and II) has caused the monetary base—the sum of currency and bank reserves—to explode in the past three years, but has not resulted in similarly large increases in the growth of broader measures of the money supply … Continue reading →

Over at Market Beat: WSJ.com’s inside look at the markets, Mark Gongloff reports that Standard Chartered’s David Semmens says that “Based on a strict Taylor-rule calculation, the first effective fed-funds rate increase shouldn’t come until the first quarter of 2013.” … Continue reading →

During the panic in the fall of 2008 some interpreted the explosion of the Fed’s balance sheet and the monetary base (MB)—currency plus reserves of banks at the Fed—as an appropriate monetary policy response to a shift in the demand … Continue reading →

Patrick McGroarty and Farai Mutsaka have a great article in the Wall Street Journal about this famous one hundred trillion dollar note from Zimbabwe,including the fact that I carry one around in my wallet everywhere I go. Whenever someone says … Continue reading →

Proponents of Quantitative Easing frequently cite—inappropriately in my view—the Taylor Rule as support, saying that the rule calls for a federal funds rate as low as minus 6 percent, well below the zero bound. But in various pieces over the … Continue reading →

Last Friday in New York, Charles Plosser, President of the Philadelphia Fed, proposed an exit strategy for the Fed. It’s the first explicit exit strategy to be put forth by a member of the FOMC, so it deserves careful consideration … Continue reading →

Monetary policy rules can be used both for prescriptive and descriptive purposes, but it’s important to be clear about which purpose one has in mind. A policy rule estimated over a period which included the Great Inflation of the 1970s, … Continue reading →

David Wessel writes about the “straitjacket” of a one-size-fits-all monetary policy in his Wall Street Journal column this week. He shows why a single interest rate set by the European Central Bank is not necessarily appropriate for all the countries … Continue reading →