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Jan Toporowski

JOBNAME: EE1-NL - Karagiannis PAGE: 1 SESS: 4 OUTPUT: Thu Sep 19 12:34:12 2019 4. Monetary policy* Jan Toporowski 4.1 INTRODUCTION Monetary policy is conducted by governments, and latterly by central banks, in the belief that it affects economic outcomes, such as output, employment or inflation; in other words that a change in monetary policy causes those target variables in the economy to be different from what they would otherwise be; that is, that monetary policy acts as an exogenous influence on the economy that is outside the institution(s) conducting that

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Sheila C. Dow

30  Monetary policy* 1 Sheila C. Dow Introduction The purpose of this chapter is to consider monetary policy in terms of real social experience. Monetary policy making is itself a real social experience for policy makers. In attempting to influence real behaviour, they employ theoretical ideas, conveyed with the rhetoric of expertise, to communicate with market players. They also do so within an institutional framework that itself reflects a particular set of ideas (in particular the neutrality of money). Yet, as Niebyl (1946) has demonstrated, ideas

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Richard T. Froyen and Alfred V. Guender

Optimal Monetary Policy under Uncertainty, Second Edition 6. Monetary policy credibility In previous chapters we considered optimal monetary policy in an economy subject to exogenous shocks. The optimal strategy each period depended on the structure of these stochastic shocks. The monetary policy problem was essentially a game against nature. In the models in Chapters 4 and 5 , however, where expectations are rational, the responses of economic agents to policy actions could make those actions ineffective. Policymakers in these models appeared

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Louis- Philippe Rochon

11. Rethinking monetary policy Louis-Philippe Rochon INTRODUCTION When attempting to influence the course of economic activity, governments can rely essentially on only two possible policy levers. On the one hand, they can intervene with fiscal policy by adopting either an expansionary or a restrictive stance, or they can rely on the central bank to use interest rates. Since the 1980s, the use of fiscal policy has been largely discredited, owing to the familiar ideas that it is inflationary and leads to important crowding-out effects, despite the lack of credible

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Barry Eichengreen

9. Deflation and monetary policy Barry Eichengreen INTRODUCTION There are several justifications for revisiting one more time the connections between deflation and monetary policy. First, there is the disquieting fact that the Bank of Japan continues to meet with only mixed success in applying an aggressively expansionist monetary policy designed to finally vanquish the specter of deflation. Second, there is the fear that other East Asian countries—South Korea and perhaps even China—that have followed a Japan-like development path and now face Japan

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Simon James

One of the two main policies available to the government to influence the overall level of economic activity, the other being fiscal policy . Monetary policy is usually operated through measures to control the supply of money and the availability of credit or to influence the level of interest rates.

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Sheila C. Dow

26 Monetary policy Sheila C. Dow Introduction The theory of monetary policy has gone through marked changes over the last 50 years, with the focus changing in turn from liquidity (in the Radcliffe approach) to the money supply and money targeting (in the monetarist approach) to the money supply and inflation targeting (the new classical approach) to the current emphasis on the interest rate within an inflation-targeting framework, relying heavily on the forward-looking expectations of market participants (the new Keynesian approach). This last approach has been

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Rob Roy McGregor

15 Monetary policy Rob Roy McGregor Monetary policy involves actions taken by central banks to affect the level of interest rates and the amounts of money and credit available in an economy. These actions are intended to promote national economic goals such as price stability and sustainable economic growth. Many central banks now operate with a considerable degree of policymaking independence, and many also have inflation targeting mandates. These monetary authorities must nevertheless be mindful of the political context in which they make their policy

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Peter Howells

Monetary policy 257 See also: Agency; Credit Rationing; Effective Demand; Employment; Expectations; Financial Instability Hypothesis; Investment; Marginalism; New Classical Economics; New Keynesian Economics; Non-ergodicity; Uncertainty; Wages and Labour Markets. References Crotty, James R. (1994), ‘Are Keynesian uncertainty and macrotheory incompatible? Conventional decision making, institutional structures and conditional stability in Keynesian macromodels’, in G. Dymski and R. Pollin (eds), New Perspectives in Monetary Macroeconomics: Explorations in the

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Edited by Thomas Cate

Central banks affect the level of economic activity by influencing the size of a nation’s money supply or the level of nominal interest rates. Through their ability to issue high-powered money by purchasing securities in the open market or by lending to banks, central banks influence both the quantity of money created by banks and the interest rate on loans. Monetary policy refers to the use of central bank policy tools to achieve macroeconomic or financial goals. The choice of an appropriate policy goal depends on the structure of