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The Most Dangerous Idea in Federal Reserve History: Monetary Policy Doesn't Matter

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  • Christina D. Romer
  • David H. Romer

Abstract

Monetary policy-makers' beliefs about how the economy functions are a key determinant of the conduct of policy. That monetary policy has little impact under the prevailing circumstances is a belief which has resurfaced periodically over the Federal Reserve's 100-year history. In both the 1930s and the 1970s a belief in the ineffectiveness of monetary policy led to policy inaction and poor economic outcomes. For some of the recent period, the same view appears to have limited the policy response to prolonged high unemployment in the presence of low inflation.

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 103 (2013)
Issue (Month): 3 (May)
Pages: 55-60

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Handle: RePEc:aea:aecrev:v:103:y:2013:i:3:p:55-60

Note: DOI: 10.1257/aer.103.3.55
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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. 'A Century of U.S. Central Banking: Goals, Frameworks, Accountability'
    by Mark Thoma in Economist's View on 2013-07-10 13:48:26
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Cited by:
  1. Christina D. Romer, 2013. "It Takes a Regime Shift: Recent Developments in Japanese Monetary Policy through the Lens of the Great Depression," NBER Chapters, in: NBER Macroeconomics Annual 2013, Volume 28, pages 383-400 National Bureau of Economic Research, Inc.
  2. Eva Arnold & Lena Dräger & Ulrich Fritsche, 2014. "Evaluating the Link between Consumers' Savings Portfolio Decisions, their Inflation Expectations and Economic News," Macroeconomics and Finance Series 201402, Hamburg University, Department Wirtschaft und Politik.

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