Economic Policies for Growth and Sustainability
Edited by Nikolaos Karagiannis and John E. King
Chapter 8: Monetary policy and central banks’ interventions: a critical investigation
Rossi presents the mainstream and conventional view that considers money to be ‘neutral’ on real magnitudes and attributes to monetary policy the single goal of price stability. The author then elaborates on monetary targeting/inflation targeting strategies, which have resulted in output and employment losses and have contributed to inflating credit bubbles that, eventually, led to financial crises of a systemic nature. Rossi recommends that monetary policy should aim at financial stability as well as higher employment, abandoning the dogma of central bank independence.
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