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Scott T. Fullwiler

Neoclassical economists have traditionally focused on monetary policy strategies and largely neglected the details of their implementation. By contrast, the post-Keynesian tradition has incorporated monetary policy implementation for several decades as a core part of its critique of neoclassical models. This chapter describes ten principles underlying central-bank operations in general that one might consider to be ‘what every economist should know’. Many, if not most, of these principles are contrary to the standard neoclassical models and textbooks, and, with regard to the post-Keynesian literature, tend to favour the horizontalists’ view over the structuralists’ view.

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Scott T. Fullwiler

A number of debates are taking place regarding the appropriate response of monetary policy both to the crisis and the Great Recession that followed, particularly in regard to interest on reserve balances and so-called unconventional monetary policy operations. This paper describes in detail an endogenous money perspective on the interactions between central bank operations and banks, and then shows that interest on reserve balances does not impede the transmission of monetary policy, while quantitative easing does not necessarily enhance it.