Chapter 17. The Conduct of Monetary Policy: Strategy and Tactics
|
|
- Jocelin Price
- 6 years ago
- Views:
Transcription
1 Chapter 17 The Conduct of Monetary Policy: Strategy and Tactics
2 Six Goals of Central Banks Price stability High employment Economic growth Stability of financial markets Interest rate stability Stability in foreign exchange markets 16-2
3 The Price Stability Goal Price stability (i.e. low and stable inflation) is viewed as the most important goal of monetary policy Inflation Creates uncertainty and difficulty in planning for the future When there is uncertainty, investment declines (investors look for a stable environment where they can predict demand) Decision making is more difficult for the consumers as well Less efficient financial system Lowers economic growth I (down)y (down) Strains social fabric Political tension between groups to ensure that their real incomes stay the same 16-3
4 Nominal anchor In order to achieve price stability, a nominal anchor is chosen Nominal anchor is a nominal target variable such as the inflation rate or the money supply to fix the price level to ensure stability Nominal anchor is particularly important in dealing with the time-inconsistency problem Time-inconsistency problem The conflict that arises between short-run and long-run priorities. Short-run expansionary policies seem more appealing (everybody is happy) but long-run consequences of an expansionary policy is inflation. Nominal anchor sets a rule to be followed in the short-run 16-4
5 Other Goals of Monetary Policy High employment It is desired to utilize economic capacity Both in terms of workers and other capital resources High employment does not necessarily imply zero unemployment Frictional unemployment Structural unemployment The tricky issue is to determine the natural rate of unemployment The unemployment rate at full employment How could one determine the full employment level? Try to maintain an unemployment level that is not inflationary: currently 4.5-6% in U.S. 16-5
6 Economic Growth Closely related to high employment Capital investment is more likely to take place if unemployment rate is low and current factories are working at full capacity CB can engage in policies to promote investments or savings The aim is to increase potential GDP 16-6
7 Stability of Financial Markets Financial stability is necessary for financial markets to work efficiently in channeling funds Example: Recent financial crisis 16-7
8 Interest Rate Stability Stability allows people to plan for the future e.g. housing market (house credit) is a large part of the economy CB may want to avoid upward movements in interest rates Tight monetary policy creates hostility towards CB 16-8
9 Stability in Foreign Exchange Markets The importance of this goal increases with the share of foreign trade. Stabilizing the value of foreign exchange enables planning for the exporters and importers An increase in the value of domestic currency will decrease exports 16-9
10 Should Price Stability be the Primary Goal? In the long run there is no conflict between the goals The usual inflation-unemployment trade-off does not work in the long run High unemployment in the short run does not cause changes in the natural rate of unemployment In the medium run it can conflict with the goals of high employment and interest-rate stability Y (up), unemployment (down), inflation (up) contractionary MP interest rate (up) unemployment (up) 16-10
11 How can the Central Bank resolve the conflict among different goals? Hierarchical mandate Impose price stability as the primary goal of the central bank by law Other goals can be supported once price stability is achieved Dual mandate Allow the central bank to balance between price stability and sustainable growth Gives more flexibility to the central bank. However, the emphasis should be long-run (not short-run) growth in output 16-11
12 Which one is better? So long as the price stability goal is interpreted as the long-run goal, both mandates would work If the CB is operating under hierarchical mandate, then it should be careful not to focus on deviations of inflation from its long run goals for short periods of time. If dual mandate leads a CB to pursue short-run expansionary policies without worrying about long run inflation, the time-inconsistency problem would occur
13 If the CB is operating under a dual mandate, then it should be careful to interpret maximum employment as full employment in the long-run. Pushing for high employment in the short-run may cause output to increase such that Y Actual >Y Potential, inflation (up) 16-13
14 Inflation Targeting I Public announcement of medium-term numerical target for inflation Institutional commitment to price stability as the primary, long-run goal of monetary policy (i.e. hierarchical mandate) and a commitment to achieve the inflation goal Information-inclusive approach in which many variables are used in making decisions CB considers any variable that may be relevant in decision making Increased transparency of the strategy In order to achieve better communication and set inflationary expectations Increased accountability of the central bank CB is accountable for achieving long-run objectives 16-14
15 FIGURE 1 Inflation Rates and Inflation Targets for New Zealand, Canada, and the United Kingdom, Source: Ben S. Bernanke, Thomas Laubach, Frederic S. Mishkin, and Adam S. Poson, Inflation Targeting: Lessons from the International Experience (Princeton: Princeton University Press, 1999), updates from the same sources, and
16 Take a look at the relevant picture for Turkey at the following link (scroll down to the bottom of the page): Implicit inflation targeting from Explicit inflation targeting from 2006 onwards 16-16
17 Inflation Targeting: Advantages Reduces potential of falling in time-inconsistency trap Sets an excuse against expansionary monetary policy Easily understood The relationship between monetary aggregates (say M2) and inflation may be less clear and can change over time Stresses transparency and accountability Better communication with public through speeches, annual inflation reports, etc. The goal is to help the public form expectations for the future Increase investment 16-17
18 Inflation Targeting: Disadvantages (I) Delayed signaling It takes a while to achieve a target inflation rate (long lags) Too much rigidity It may limit the ability of the CB to respond to unforeseen circumstances Ex: During the financial crisis, oil prices increased, putting an upward pressure on inflation rate Should a CB implement contractionary monetary policy in the middle of a global recession? Solution: Flexible inflation targeting 16-18
19 Inflation Targeting: Disadvantages (II) Potential for increased output fluctuations The focus on lowering the inflation may cause the CB to ignore output (Ex: ECB tightened its policy rate in the middle of the crisis because they did not think that Euro area inflation rate necessitated easy MP yet) In order to avoid the negative impact of a low inflation rate on output, inflation targeters might want to choose a target above zero Targeting non-zero inflation makes deflation risk less likely Low economic growth The trade-off between low inflation and high employment However, once a lower level of inflation is achieved, output growth returns to its original level (or higher) as lower inflation attracts more investment 16-19
20 Implicit Nominal Anchor (The Fed example) An explicit nominal anchor refers to an explicit target such as monetary targeting or inflation targeting In the U.S. there is no explicit anchor. Instead there is an implicit anchor which is long-run inflation This has changed in January
21 U.S. policy is forward looking and preemptive Policy makers watch for future inflation and take actions today to prevent future inflation Once the inflation is realized and gains momentum, it is built into expectations and is very hard to stop 16-21
22 Advantages Uses many sources of information Similar to inflation targeting Avoids time-inconsistency problem Emphasis on price stability discourages overly expansionary policy Demonstrated success Inflation rate has been around 3 percent for the last 30 years Growth rate has been around 3 percent as well 16-22
23 Disadvantages Lack of transparency and accountability Not as transparent as inflation targeting (no announcements of nominal objectives) Nothing is stated explicitly as long-term goals Volatility in financial markets Strong dependence on the preferences, skills, and trustworthiness of individuals in charge What if the future leaders are not as committed to price stability? Inconsistent with democratic principles Because there are no explicit goals, the CB is not accountable to public unlike the case of explicit anchors 16-23
The Price Stability Goal
The Price Stability Goal Low and stable inflation Inflation Creates uncertainty and difficulty in planning for future Lowers economic growth Strains social fabric Nominal anchor Time-inconsistency problem
More informationThe Conduct of Monetary Policy
The Conduct of Monetary Policy This lecture examines the strategies and tactics central banks use to conduct monetary policy. Price Stability, a Nominal Anchor, and the Time-Inconsistency Problem A. Price
More informationMoney and Banking ECON3303. Lecture 16: The Conduct of Monetary Policy: Strategy and Tactics. William J. Crowder Ph.D.
Money and Banking ECON3303 Lecture 16: The Conduct of Monetary Policy: Strategy and Tactics William J. Crowder Ph.D. The Price Stability Goal and the Nominal Anchor Over the past few decades, policy makers
More informationChapter 10. Conduct of Monetary Policy: Tools, Goals, Strategy, and Tactics. Chapter Preview
Chapter 10 Conduct of Monetary Policy: Tools, Goals, Strategy, and Tactics Chapter Preview Monetary policy refers to the management of the money supply. The theories guiding the Federal Reserve are complex
More informationChapter Eighteen 4/19/2018. Linking Tools to Objectives. Linking Tools to Objectives
Chapter Eighteen Chapter 18 Monetary Policy: Stabilizing the Domestic Economy Part 3 Linking Tools to Objectives Tools OMO Discount Rate Reserve Req. Deposit rate Linking Tools to Objectives Monetary goals
More informationChapter 24. The Role of Expectations in Monetary Policy
Chapter 24 The Role of Expectations in Monetary Policy Lucas Critique of Policy Evaluation Macro-econometric models collections of equations that describe statistical relationships among economic variables
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Assignment 3 - Money and Banking - Econ 3381-01 - Fall 2015 Note: Submit your answers using Blackboard Learn. Notice that the order in which the answers appear [i.e., A), B), C), and D)] are different
More informationCost Shocks in the AD/ AS Model
Cost Shocks in the AD/ AS Model 13 CHAPTER OUTLINE Fiscal Policy Effects Fiscal Policy Effects in the Long Run Monetary Policy Effects The Fed s Response to the Z Factors Shape of the AD Curve When the
More informationMacroeconomic Policy and Aggregate Demand and Supply Analysis. Reference : Mishkin, Macroeconomics: Policy and Practice, Chapter 12-13
Macroeconomic Policy and Aggregate Demand and Supply Analysis Reference : Mishkin, Macroeconomics: Policy and Practice, Chapter 12-13 The Objectives of Macroeconomic Policy Two primary objectives of macroeconomic
More information: Monetary Economics and the European Union. Lecture 5. Instructor: Prof Robert Hill. Inflation Targeting
320.326: Monetary Economics and the European Union Lecture 5 Instructor: Prof Robert Hill Inflation Targeting Note: The extra class on Monday 11 Nov is cancelled. This lecture will take place in the normal
More information14 MONETARY POLICY Part 2
14 MONETARY POLICY Part 2 The Conduct of Monetary Policy The Fed s Decision-Making Strategy The decision to change the target Federal Funds rate begins with an assessment of the current state of the economy.
More information1. When the Federal government uses taxation and spending actions to stimulate the economy it is conducting:
1. When the Federal government uses taxation and spending actions to stimulate the economy it is conducting: A. Fiscal policy B. Incomes policy C. Monetary policy D. Employment policy 2. When the Federal
More information5. An increase in government spending is represented as a:
Romer Section 1 1. The IS curve represents combinations of Y and r that: a. are consistent with equilibrium in the money market. b. are consistent with equilibrium in the goods market. c. are positively
More informationThe Model at Work. (Reference Slides I may or may not talk about all of this depending on time and how the conversation in class evolves)
TOPIC 7 The Model at Work (Reference Slides I may or may not talk about all of this depending on time and how the conversation in class evolves) Note: In terms of the details of the models for changing
More informationMonetary Policy Theory Monetary Policy Analysis Monetary Policy Implementation. Monetary Policy. Bilgin Bari
Theory Analysis Implementation Theory Analysis Implementation AD-AS analysis is a powerful tool for studying short-run fluctuations in the macroeconomy. We can analyze how aggregate output and inflation
More informationInflation Targeting. The Future of U.S. Monetary Policy? Henning Bohn Department of Economics UCSB
Inflation Targeting The Future of U.S. Monetary Policy? Henning Bohn Department of Economics UCSB Turnover at the Federal Reserve Alan Greenspan leaving Jan.31 Where do we stand? Are we on the right track?
More informationInterest Rates and Monetary Policy
14 Interest Rates and Monetary Policy 14-1 Chapter Objectives How the equilibrium interest rate is determined in the market for money. The goals and tools of monetary policy. The federal funds rate and
More informationINFLATION TARGETING IN EMERGING MARKET COUNTRIES
99aea.wpd Page 1 INFLATION TARGETING IN EMERGING MARKET COUNTRIES by Frederic S. Mishkin Graduate School of Business, Columbia University and National Bureau of Economic Research E-mail: fsm3@columbia.edu
More informationBoğaziçi University Department of Economics Money, Banking and Financial Institutions L.Yıldıran
Boğaziçi University Department of Economics Money, Banking and Financial Institutions L.Yıldıran Chapter 13 GOALS, STRATEGIES AND TACTICS Too loose MP à inflation rises, efficiency declines, growth is
More informationEconomics of Money, Banking, and Fin. Markets, 10e (Mishkin) Chapter 25 Transmission Mechanisms of Monetary Policy
Economics of Money, Banking, and Fin. Markets, 10e (Mishkin) Chapter 25 Transmission Mechanisms of Monetary Policy 25.1 Transmission Mechanism of Monetary Policy 1) Economic theory suggests that interest
More informationChapter 26 Transmission Mechanisms of Monetary Policy: The Evidence
Chapter 26 Transmission Mechanisms of Monetary Policy: The Evidence Multiple Choice 1) Evidence that examines whether one variable has an effect on another by simply looking directly at the relationship
More informationIn pursuing a strategy of monetary targeting, the central bank announces that it will
Appendix to chapter 16 Monetary Targeting In pursuing a strategy of monetary targeting, the central bank announces that it will achieve a certain value (the target) of the annual growth rate of a monetary
More informationEcon 330 Final Exam Name ID Section Number
Econ 330 Final Exam Name ID Section Number MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A group of economists believe that the natural rate
More informationFiscal Policy Chapter Don t always follow the advice of following your dreams because it s hard to get a job as a dragonfly.
Fiscal Policy Chapter 15.1 Don t always follow the advice of following your dreams because it s hard to get a job as a dragonfly. Budget: a list of all your income and a list of all of your expenses and
More informationFinal Examination Semester 2 / Year 2012
Final Examination Semester 2 / Year 2012 COURSE : ECONOMICS COURSE CODE : ECON1023 TIME : 2 1/2 HOURS DEPARTMENT : IT AND JOURNALISM & COMMUNICATION STUDIES LECTURER : CHING YANN PENG Student s ID : Batch
More informationModule 31. Monetary Policy and the Interest Rate. What you will learn in this Module:
Module 31 Monetary Policy and the Interest Rate What you will learn in this Module: How the Federal Reserve implements monetary policy, moving the interest to affect aggregate output Why monetary policy
More informationInflation Targeting After 28 Years: What Have We Learned?
Inflation Targeting After 28 Years: What Have We Learned? Presentation at a conference organized by the Finance Ministry of Norway Oslo, Norway 16 January 2017 John Murray Former Deputy Governor of the
More informationFrancis Cairncross: Professor Friedman, in recent years, we have seen an acceleration in inflation all over the world. What has caused that?
Inflation v. Civilization; Frances Cairncross Puts Questions to Professor Milton Friedman, Arch-exponent of Monetarism Milton Friedman interviewed by Frances Cairncross Guardian, 21 September 1974, p.
More informationTARGET ING INFLATION. Fed Policy after Greenspan. By Ben S. Bernanke, Frederic S. Mishkin & Adam S. Posen
right: robert c. burke; top: george de keerle/both liaison international TThe Federal Reserve s performance under Chairman Alan Greenspan has been nothing short of miraculous. During his tenure, inflation
More informationCharles I Plosser: Strengthening our monetary policy framework through commitment, credibility, and communication
Charles I Plosser: Strengthening our monetary policy framework through commitment, credibility, and communication Speech by Mr Charles I Plosser, President and Chief Executive Officer of the Federal Reserve
More informationFiscal Dimensions of Inflationist Monetary Policy. Marvin Goodfriend Carnegie Mellon University and National Bureau of Economic Research
Fiscal Dimensions of Inflationist Monetary Policy Marvin Goodfriend Carnegie Mellon University and National Bureau of Economic Research Shadow Open Market Committee October 21, 2011 Introduction Policymakers
More informationEcon 102 Final Exam Name ID Section Number
Econ 102 Final Exam Name ID Section Number 1. Assume that the economy is contracting and unemployment is rising. Which of the following would be a logical explanation for a sudden fall in the unemployment
More informationStrengthening Our Monetary Policy Framework Through Commitment, Credibility, and Communication
Strengthening Our Monetary Policy Framework Through Commitment, Credibility, and Communication Global Interdependence Center's 2011 Global Citizen Award Luncheon November 8, 2011 Union League Club, Philadelphia,
More informationTo sum up: What is an Equilibrium?
TOPIC 7 The Model at Work To sum up: What is an Equilibrium? SHORT RUN EQUILIBRIUM: AD = SRAS and IS = LM The Labor Market need not be in equilibrium We need not be at the potential level of GDP Y* If
More informationFinal Examination Semester 2 / Year 2012
Final Examination Semester 2 / Year 2012 COURSE : MACROECONOMICS COURSE CODE : ECON1013 TIME : 2 1/2 HOURS DEPARTMENT : MANAGEMENT LECTURER : CHING YANN PENG Student s ID : Batch No. : Notes to candidates:
More informationINFLATION TARGETING: LESSONS FROM THE INTERNATIONAL EXPERIENCE. Frederic S. Mishkin
INFLATION TARGETING: LESSONS FROM THE INTERNATIONAL EXPERIENCE Frederic S. Mishkin Graduate School of Business, Columbia University and National Bureau of Economic Research 1 OUTLINE! The Role of a Nominal
More informationComments on Monetary Policy at the Effective Lower Bound
BPEA, September 13-14, 2018 Comments on Monetary Policy at the Effective Lower Bound Janet Yellen, Distinguished Fellow in Residence Hutchins Center on Fiscal and Monetary Policy, Brookings Institution
More informationThis PDF is a selection from a published volume from the National Bureau of Economic Research. Volume Title: The Inflation-Targeting Debate
This PDF is a selection from a published volume from the National Bureau of Economic Research Volume Title: The Inflation-Targeting Debate Volume Author/Editor: Ben S. Bernanke and Michael Woodford, editors
More informationChapter 9. Introduction to Economic Fluctuations (Continued) CHAPTER 9 Introduction to Economic Fluctuations. slide 0
Chapter 9 Introduction to Economic Fluctuations (Continued) slide 0 Stabilization Policies Economic fluctuations (or business cycles) refer to deviations of real GDP growth from its long run average growth
More information2% Forever? Rethinking the Inflation Target
2% Forever? Rethinking the Inflation Target Frederic S. Mishkin Graduate School of Business, Columbia University OENB-BIS Conference, Central Banking in Times of Change Vienna, September 13-14, 2016 Key
More informationMonetary Policy Revised: January 9, 2008
Global Economy Chris Edmond Monetary Policy Revised: January 9, 2008 In most countries, central banks manage interest rates in an attempt to produce stable and predictable prices. In some countries they
More informationEvery Breath You Take
Every Breath You Take Every Breath You Take Monetary and Fiscal Policy Chapters 10, 13, and 14! Stabilizing the Economy Controlling unemployment and inflation (Dual Mandate)! Demand Side Policies Keynesian
More information10/21/2018. Chapter 16. Learning Objectives. Central Banks. Functions and objectives of central banks. Features of an effective central bank.
Chapter 16 Central Banks (in the world today) and the Federal Reserve System Learning Objectives Functions and objectives of central banks. Features of an effective central bank. Federal Reserve organization
More informationLECTURE 18. AS/AD in demand-deficient Ireland: Unemployment and Deflation
LECTURE 18 AS/AD in demand-deficient Ireland: Unemployment and Deflation THE AGGREGATE SUPPLY CURVE Aggregate supply curve Each possible price level Quantity of goods & services All nation s businesses
More informationAdvanced Macroeconomics 4. The Zero Lower Bound and the Liquidity Trap
Advanced Macroeconomics 4. The Zero Lower Bound and the Liquidity Trap Karl Whelan School of Economics, UCD Spring 2015 Karl Whelan (UCD) The Zero Lower Bound Spring 2015 1 / 26 Can Interest Rates Be Negative?
More informationEC3115 Monetary Economics
EC3115 :: L.5 : Monetary policy tools and targets Almaty, KZ :: 2 October 2015 EC3115 Monetary Economics Lecture 5: Monetary policy tools and targets Anuar D. Ushbayev International School of Economics
More informationLessons from Other Central Banks?
Lessons from Other Central Banks? Athanasios Orphanides MIT Monetary Policy Framework Issues: Towards the 2021 Inflation Target Renewal Bank of Canada, 14 September 2017 1 Bank of Canada: Key Inflation
More informationINFLATION TARGETING IN THE CONTEXT OF THE CURRENT FINANCIAL CRISIS
Year VIII, No. 10/2009 161 INFLATION TARGETING IN THE CONTEXT OF THE CURRENT FINANCIAL CRISIS Assoc. Prof. Daniela Geogeta BEJU, PhD Lect. Angela Maria FILIP, PhD Babeş Bolyai University, Cluj Napoca 1.
More informationMONETARY POLICY. 8Topic
MONETARY POLICY 8Topic The Central Bank: CB The Federal Reserve System, commonly known as the Fed, is the central bank of the United States. A Central Bank (CB) is the public authority that, typically,
More informationInflation Targeting and Inflation Prospects in Canada
Inflation Targeting and Inflation Prospects in Canada CPP Interdisciplinary Seminar March 2006 Don Coletti Research Director International Department Bank of Canada Overview Objective: answer questions
More informationImproving the Use of Discretion in Monetary Policy
Improving the Use of Discretion in Monetary Policy Frederic S. Mishkin Graduate School of Business, Columbia University And National Bureau of Economic Research Federal Reserve Bank of Boston, Annual Conference,
More informationDavid Dodge: Canada s experience with inflation targets and a flexible exchange rate: lessons learned
David Dodge: Canada s experience with inflation targets and a flexible exchange rate: lessons learned Remarks by Mr David Dodge, Governor of the Bank of Canada, to the Canadian Society of New York, New
More informationChapter 17. The Conduct of Monetary Policy: Strategy and Tactics (Lecture 2)
Chapter 17 The Conduct of Monetary Policy: Strategy and Tactics (Lecture 2) Lessons for Monetary Policy from the Financial Crisis 1. Developments in the financial sector have a far greater impact on economic
More informationEconomics of Money, Banking, and Fin. Markets, 10e (Mishkin) Chapter 18 The International Financial System
Economics of Money, Banking, and Fin. Markets, 10e (Mishkin) Chapter 18 The International Financial System 18.1 Intervention in the Foreign Exchange Market 1) A central bank of domestic currency and corresponding
More informationMonetary Policy Frameworks
Monetary Policy Frameworks Loretta J. Mester President and Chief Executive Officer Federal Reserve Bank of Cleveland Panel Remarks for the National Association for Business Economics and American Economic
More informationTaylor and Mishkin on Rule versus Discretion in Fed Monetary Policy
Taylor and Mishkin on Rule versus Discretion in Fed Monetary Policy The most debatable topic in the conduct of monetary policy in recent times is the Rules versus Discretion controversy. The central bankers
More informationECONOMICS 1B ECS1601 Semester 1 Department of Economics Revision week 4 Learning units 9, 10 and 11
ECONOMICS 1B ECS1601 Semester 1 Department of Economics Revision week 4 Learning units 9, 10 and 11 Contents Page Learning unit 9 Inflation... 3 Learning unit 10 Unemployment... 8 Learning unit 11 Economic
More informationWHAT SHOULD CENTRAL BANKS DO?
WHAT SHOULD CENTRAL BANKS DO? by Frederic S. Mishkin Graduate School of Business, Columbia University and National Bureau of Economic Research Uris Hall 619 Columbia University New York, New York 10027
More informationMonetary Policy Strategy: Crisis. Frederic Mishkin April 7, 2011
Monetary Policy Strategy: What Have We Learned From the Crisis Frederic Mishkin April 7, 2011 Si Science of Monetary Policy Pli Before Bf the Crisis Cii Monetary Policy Strategy Before the Crisis How Has
More informationDaniel Mminele: Thoughts on South Africa s monetary policy
Daniel Mminele: Thoughts on South Africa s monetary policy Address by Mr Daniel Mminele, Deputy Governor of the South African Reserve Bank, at the JP Morgan Investor Conference, Washington DC, 16 April
More informationMonetary Policy Objectives
Monetary Policy Objectives Purpose Phase 1 of the Review of the Reserve Bank Act considers changes to the Act to provide for requiring monetary policy decision-makers to give due consideration to maximising
More information2Q16. Don t Be So Negative. June Uncharted territory
2Q16 TOPICS OF INTEREST Don t Be So Negative June 2016 ANDREW AKERS Analyst Following the financial crisis of 2008, slow global growth and low inflation have prompted a number of central banks to implement
More informationUnderstanding the World Economy Master in Economics and Business. Monetary policy. Nicolas Coeurdacier
Understanding the World Economy Master in Economics and Business Monetary policy Lecture 8 Nicolas Coeurdacier nicolas.coeurdacier@sciencespo.fr Lecture 8 : Monetary policy 1. What is monetary policy?
More informationDr. Mary J. McGlasson Video #32 on Monetary Policy
Monetary Policy Assignment #14 https://www.youtube.com/watch?v=1dq7mmort9o&index=10&list=pl8dpuualjxtpnzwz5_o_5uirj8gqxnheo Monetary Policy and the Federal Reserve: Crash Course Economics #10 https://www.youtube.com/watch?v=hdznoqp4smu&index=32&list=plf2a3693d8481f442
More informationFlexible Commitment or Inflation Targeting for the U.S.?
Flexible Commitment or Inflation Targeting for the U.S.? Based on a speech given by President Santomero to the Money Marketeers, New York, NY, June 10, 2003 BY ANTHONY M. SANTOMERO T he idea of creating
More informationOn Abenomics and the Japanese Economy. Motoshige Itoh Member, Council on Economic and Fiscal Policy and Professor, University of Tokyo
On Abenomics and the Japanese Economy Motoshige Itoh Member, Council on Economic and Fiscal Policy and Professor, University of Tokyo The purpose of this brief overview is to summarize some of the major
More informationGO ON TO THE NEXT PAGE. -8- Unauthorized copying or reuse of any part of this page is illegal.
30. Which of the following is most likely to be caused by an adverse supply shock? (A) Structural unemployment (B) Frictional unemployment (C) Demand-pull inflation (D) Cost-push inflation (E) Deflation
More informationAP Macroeconomics - Mega Macro Review Sheet Answers
AP Macroeconomics - Mega Macro Review Sheet Answers 1. The business cycle. 2. Aggregate supply curve (with breakdown of sections). 3. Expansionary ( easy ) monetary policy (Buy bonds, discount rate, reserve
More informationPart 1B: Against active policy. Stabilization Policy CHAPTER 14. Part 1A: Arguments for active policy. Two policy debates:
CHAPTER 14 Two policy debates: 1. Should policy be active or passive? 2. Should policy be by rule or discretion? slide 0 Part 1A: Arguments for active policy US economy has undergone expansions and recessions
More informationInternational Money and Banking: 14. Real Interest Rates, Lower Bounds and Quantitative Easing
International Money and Banking: 14. Real Interest Rates, Lower Bounds and Quantitative Easing Karl Whelan School of Economics, UCD Spring 2018 Karl Whelan (UCD) Real Interest Rates Spring 2018 1 / 23
More informationPrinciples of Macroeconomics November 11th, Answer Key Midterm 2
EC132.01(02) Serge Kasyanenko rinciples of Macroeconomics November 11th, 2005 I. Multiple Choice Section (30 points). Select one correct answer. Answer all questions. 1. A stable inflation can be achieved
More informationSeptember 4, VIX Volatility Index. U.S. Real GDP Growth. Global Economic Research 50 South LaSalle Chicago, Illinois northerntrust.
September 4, 2015 Global Economic Research 50 South LaSalle Chicago, Illinois 60603 northerntrust.com Carl R. Tannenbaum Chief Economist 312.557.8820 ct92@ntrs.com Asha G. Bangalore Economist 312.444.4146
More informationEconomics Unit Four. Macroeconomics
Economics Unit Four Macroeconomics Macroeconomics Macroeconomics is the study of the whole economy together the aggregated spending, saving, and investing decisions of all consumers and businesses describes
More informationUnderstanding Monetary Policy and Financial Markets
Understanding Monetary Policy and Financial Markets Mahmood ul Hasan Khan Additional Director Economic Policy Review Department State Bank of Pakistan Monetary Policy: Concepts, Framework and Experience
More informationComments on Stefan Gerlach and Thomas J. Jordan, Tactics and Strategy in Monetary Policy: Benjamin Friedman s Thinking and the Swiss National Bank *
Comments on Stefan Gerlach and Thomas J. Jordan, Tactics and Strategy in Monetary Policy: Benjamin Friedman s Thinking and the Swiss National Bank * Lars E.O. Svensson Sveriges Riksbank, Stockholm University,
More informationChapter 14 Monetary Policy
Chapter Overview Chapter 14 Monetary Policy The objectives and the mechanics of monetary policy are covered in this chapter. It is organized around seven major topics: (1) interest rate determination;
More informationFRBSF ECONOMIC LETTER
FRBSF ECONOMIC LETTER 2011-11 April 11, 2011 The Fed s Interest Rate Risk BY GLENN D. RUDEBUSCH To make financial conditions more supportive of economic growth, the Federal Reserve has purchased large
More informationInflation targeting an alternative monetary policy strategy for the ECB? Gustav A. Horn
Inflation targeting an alternative monetary policy strategy for the ECB? by Gustav A. Horn Düsseldorf March 2008 1 Executive Summary Inflation targeting an alternative monetary policy strategy for the
More informationAP Macroeconomics Graphical Overview
AP Macroeconomics Graphical Overview 1. The business cycle. 2. Aggregate supply curve (with breakdown of sections). 3. Expansionary ( easy ) monetary policy (Buy bonds, discount rate, reserve requirement).
More informationMID-TERM REVIEW OF THE 2013 MONETARY POLICY STATEMENT
MID-TERM REVIEW OF THE MONETARY POLICY STATEMENT. INTRODUCTION. The Mid-Term Review (MTR) of the Monetary Policy Statement (MPS) evaluates progress in achieving the percent medium-term inflation objective.
More informationExpansionary Fiscal Policy 2. If the economy is experiencing a recession what type of fiscal policy would be in order?
Stabilization Policies Reading Guide Chapters 12, 16, and 18 Chapter 12: Fiscal Policy 1. Assess the effect of fiscal policy on real output, price level, and the level of employment in the long run and
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Econ 330 Spring 2017: FINAL EXAM Name ID Section Number MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Tobin's q theory suggests that monetary
More informationChapter 13 Monetary Policy.notebook. February 03, Chapter 13: Monetary Policy Pages
Chapter 13: Monetary Policy Pages 352 362 Stabilization Policies policies that influence the amount spent and produced in an economy which attempt to keep the economy as close as possible to potential
More informationSuggested Answers Problem Set # 5 Economics 501 Daniel
1. Use graphs of IS-LM-FE and AS-AD models to explain why RBC models with productivity shocks and money-supply shocks fail to explain the pro-cyclicality of money growth and inflation. Inflation falls
More information4. (Figure: Monetary Policy 1) If the money market is initially at E 2 and the central bank chooses
Name: Date: Use the following to answer questions 1-6. Figure: Monetary Policy 1 1. (Figure: Monetary Policy 1) If the money market is initially at E 1 and the central bank chooses to sell bonds, then:
More informationSNS - Ricerca di base - Programma Manuela Moschella
SNS - Ricerca di base - Programma 2017 - Manuela Moschella Summary of the planned research activities My research activity for 2017 will focus on two main projects: the political-economic determinants
More informationPractice Problems
Practice Problems 33-34-36 1. The inflation tax is: A. the higher tax paid by individuals whose incomes are indexed to inflation. B. the taxes paid during periods of inflation. C. the reduction in the
More informationOutline. How the banking system works? What is the Fed and how does it work? What is a monetary policy?
FdPli Fed Policy and dm Money Markets kt 1 Outline How the banking system works? What is the Fed and how does it work? What is a monetary policy? What about the current credit crunch? 2 Money Supply We
More information4.2 Fiscal Policy.notebook May 02, Fiscal Policy
4.2 Fiscal Policy How do we achieve our three economic objectives? Economic Growth Full Employment Steady inflation With Monetary and Fiscal Policy! Review of the Business Cycle A cycle goes through a
More informationSV151, Principles of Economics K. Christ February 2012
SV151, Principles of Economics K. Christ 13 17 February 2012 SV151, Principles of Economics K. Christ 14 February 2012 Key terms / chapter 23: Aggregate demand Wealth effects Interest rate effects Exchange
More information2. Why is it important for the Fed to know the size and the rate of growth of the money supply?
KOFA HIGH SCHOOL SOCIAL SCIENCES DEPARTMENT AP ECONOMICS EXAM PREP WORKSHOP # 4 > MONEY, MONETARY POLICY, AND ECONOMIC STABILITY NAME : DATE : All About The Ms : 1. What are the three basic functions of
More informationReconciling FOMC Forecasts and Forward Guidance. Mickey D. Levy Blenheim Capital Management
Reconciling FOMC Forecasts and Forward Guidance Mickey D. Levy Blenheim Capital Management Prepared for Shadow Open Market Committee September 20, 2013 Reconciling FOMC Forecasts and Forward Guidance Mickey
More informationArchimedean Upper Conservatory Economics, November 2016 Quiz, Unit VI, Stabilization Policies
Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The federal budget tends to move toward _ as the economy. A. deficit; contracts B. deficit; expands C.
More informationTHE FEDERAL RESERVE. and the Banking System. Functions. The FED is the central banking system of the U.S.
UNit 4.3 THE FEDERAL RESERVE and the Banking System The FED is the central banking system of the U.S. * Established 1913 * Governing Body board of governors * Presidentially-appointed Chairman JANET YELLEN
More informationObjectives for Chapter 24: Monetarism (Continued) Chapter 24: The Basic Theory of Monetarism (Continued) (latest revision October 2004)
1 Objectives for Chapter 24: Monetarism (Continued) At the end of Chapter 24, you will be able to answer the following: 1. What is the short-run? 2. Use the theory of job searching in a period of unanticipated
More informationAP Gov Chapter 17 Outline
A major economic policy issue is how to maintain stable economic growth without falling into either excessive unemployment or inflation (rising prices). Key concept: Inflation, a sustained rise in the
More informationDiscussion of Tactics and Strategy in Monetary Policy: Benjamin Friedman s Thinking and the Swiss National Bank
Discussion of Tactics and Strategy in Monetary Policy: Benjamin Friedman s Thinking and the Swiss National Bank Lars E.O. Svensson Sveriges Riksbank, Stockholm University, CEPR, and NBER I am very happy
More informationViews on the Economy and Price-Level Targeting
Views on the Economy and Price-Level Targeting Raphael Bostic President and Chief Executive Officer Federal Reserve Bank of Atlanta Atlanta Economics Club Federal Reserve Bank of Atlanta Atlanta, Georgia
More informationSOUTH CENTRAL SAS USER GROUP CONFERENCE 2018 PAPER. Predicting the Federal Reserve s Funds Rate Decisions
SOUTH CENTRAL SAS USER GROUP CONFERENCE 2018 PAPER Predicting the Federal Reserve s Funds Rate Decisions Nhan Nguyen, Graduate Student, MS in Quantitative Financial Economics Oklahoma State University,
More informationBusiness Cycle Theory
Business Cycle Theory Changes in Business Activity Economics, Unit: 06 Lesson: 01 Objectives 1.Describe phases of business cycle 2.Identify and explain the factors that cause business cycles 3.Analyze
More information