Advanced Search
MyIDEAS: Login to save this paper or follow this series

Monetary Policy Strategy: Lessons from the Crisis

Contents:

Author Info

  • Frederic S. Mishkin

Abstract

This paper examines what we have learned and how we should change our thinking about monetary policy strategy in the aftermath of the 2007-2009 financial crisis. It starts with a discussion of where the science of monetary policy was before the crisis and how central banks viewed monetary policy strategy. It will then examine how the crisis has changed the thinking of both macro/monetary economists and central bankers. Finally, it looks how much of the science of monetary policy needs to be altered and draws implications for monetary policy strategy.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/papers/w16755.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16755.

as in new window
Length:
Date of creation: Feb 2011
Date of revision:
Publication status: published as European Central Bank: “Monetary Policy Strategy: Lessons From the Crisis” in Monetary Policy Revisited: Lessons from the Crisis (European Central Bank: Frankfurt, forthcoming.)
Handle: RePEc:nbr:nberwo:16755

Note: EFG ME
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Jean Tirole & Emmanuel Farhi, 2009. "Collective Moral Hazard, Maturity Mismatch and Systemic Bailouts," Working Papers, Fondazione Eni Enrico Mattei 2009.57, Fondazione Eni Enrico Mattei.
  2. Jens H. E. Christensen & Jose A. Lopez & Glenn D. Rudebusch, 2009. "Do central bank liquidity facilities affect interbank lending rates?," Working Paper Series, Federal Reserve Bank of San Francisco 2009-13, Federal Reserve Bank of San Francisco.
  3. Svensson, Lars E O, 1999. "Price-Level Targeting versus Inflation Targeting: A Free Lunch?," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 31(3), pages 277-95, August.
  4. Edmund S. Phelps, 1968. "Money-Wage Dynamics and Labor-Market Equilibrium," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 76, pages 678.
  5. David Gruen & Michael Plumb & Andrew Stone, 2003. "How Should Monetary Policy Respond to Asset-price Bubbles?," RBA Research Discussion Papers, Reserve Bank of Australia rdp2003-11, Reserve Bank of Australia.
  6. Frank Smets & Raf Wouters, 2002. "An estimated dynamic stochastic general equilibrium model of the euro area," Working Paper Research, National Bank of Belgium 35, National Bank of Belgium.
  7. Mishkin, Frederic S, 1982. "Does Anticipated Monetary Policy Matter? An Econometric Investigation," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 90(1), pages 22-51, February.
  8. Lars E.O. Svensson, 2000. "The Zero Bound in an Open Economy: A Foolproof Way of Escaping from a Liquidity Trap," NBER Working Papers 7957, National Bureau of Economic Research, Inc.
  9. Vasco Curdia & Michael Woodford, 2008. "Credit Frictions and Optimal Monetary Policy," Discussion Papers, Columbia University, Department of Economics 0809-02, Columbia University, Department of Economics.
  10. Frederic S. Mishkin, 1981. "Does Anticipated Aggregate Demand Policy Matter? Further Econometric results," NBER Working Papers 0789, National Bureau of Economic Research, Inc.
  11. Erceg, Christopher & Guerriei, Luca & Gust, Christopher, 2006. "SIGMA: A New Open Economy Model for Policy Analysis," MPRA Paper 813, University Library of Munich, Germany.
  12. Vasco Curdia & Michael Woodford, 2010. "Conventional and Unconventional Monetary Policy," Discussion Papers, Columbia University, Department of Economics 0910-17, Columbia University, Department of Economics.
  13. Frederic Mishkin & Klaus Schmidt-Hebbel, 2006. "Does Inflation Targeting Make a Difference?," Working Papers Central Bank of Chile, Central Bank of Chile 404, Central Bank of Chile.
  14. repec:ucp:bknber:9780226355887 is not listed on IDEAS
  15. George A. Akerlof & William R. Dickens & George L. Perry, 1996. "The Macroeconomics of Low Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 1-76.
  16. Christopher J. Erceg & Dale W. Henderson & Andrew T. Levin, 1999. "Optimal monetary policy with staggered wage and price contracts," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 640, Board of Governors of the Federal Reserve System (U.S.).
  17. Jiménez, Gabriel & Ongena, Steven & Peydró-Alcalde, José Luis & Saurina, Jesús, 2007. "Hazardous Times for Monetary Policy: What Do Twenty-Three Million Bank Loans Say About the Effects of Monetary Policy on Credit Risk?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6514, C.E.P.R. Discussion Papers.
  18. Barro, Robert J, 1977. "Unanticipated Money Growth and Unemployment in the United States," American Economic Review, American Economic Association, American Economic Association, vol. 67(2), pages 101-15, March.
  19. Yacine Aït-Sahalia & Jochen Andritzky & Andreas Jobst & Sylwia Nowak & Natalia Tamirisa, 2010. "Market Response to Policy Initiatives during the Global Financial Crisis," NBER Working Papers 15809, National Bureau of Economic Research, Inc.
  20. Alex Cukierman, 1993. "Central Bank Independence, Political Influence and Macroeconomic Performance: a Survey of Recent Development," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 30(91), pages 271-292.
  21. Andrew T. Levin & Alexei Onatski & John C. Williams & Noah Williams, 2005. "Monetary policy under uncertainty in micro-founded macroeconometric models," Working Paper Series, Federal Reserve Bank of San Francisco 2005-15, Federal Reserve Bank of San Francisco.
  22. Carmen M. Reinhart & Vincent R. Reinhart, 2010. "After the Fall," NBER Working Papers 16334, National Bureau of Economic Research, Inc.
  23. Coenen, Günter & Orphanides, Athanasios & Wieland, Volker, 2003. "Price stability and monetary policy effectiveness when nominal interest rates are bounded at zero," Working Paper Series, European Central Bank 0231, European Central Bank.
  24. Philip Lowe & Claudio Borio, 2002. "Asset prices, financial and monetary stability: exploring the nexus," BIS Working Papers 114, Bank for International Settlements.
  25. Ben S. Bernanke, 1983. "Non-Monetary Effects of the Financial Crisis in the Propagation of the Great Depression," NBER Working Papers 1054, National Bureau of Economic Research, Inc.
  26. Taylor, John B., 1998. "The Robustness and Efficiency of Monetary Policy Rules as Guidelines for Interest Rate Setting by the European Central Bank," Seminar Papers, Stockholm University, Institute for International Economic Studies 649, Stockholm University, Institute for International Economic Studies.
  27. Delis, Manthos D. & Kouretas, Georgios P., 2011. "Interest rates and bank risk-taking," Journal of Banking & Finance, Elsevier, Elsevier, vol. 35(4), pages 840-855, April.
  28. Hamilton, James D., 1987. "Monetary factors in the great depression," Journal of Monetary Economics, Elsevier, Elsevier, vol. 19(2), pages 145-169, March.
  29. Alex Cukierman, 2007. "Central Bank Independence and Monetary Policymaking Institutions: Past, Present, and Future," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 54(4), pages 367-395, December.
  30. Palle Andersen & David Gruen, 1995. "Macroeconomic Policies and Growth," RBA Annual Conference Volume, Reserve Bank of Australia, in: Palle Andersen & Jacqueline Dwyer & David Gruen (ed.), Productivity and Growth Reserve Bank of Australia.
  31. Kenneth French & Martin Baily & John Campbell & John Cochrane & Douglas Diamond & Darrell Duffie & Anil Kashyap & Frederic Mishkin & Raghuram Rajan & David Scharfstein & Robert Shiller & Hyun Song Shi, 2010. "The Squam Lake Report: Fixing the Financial System," Journal of Applied Corporate Finance, Morgan Stanley, Morgan Stanley, vol. 22(3), pages 8-21.
  32. Robert Dittmar & William T. Gavin, 1999. "What do New-Keynesian Phillips Curves imply for price level targeting?," Working Papers, Federal Reserve Bank of St. Louis 1999-021, Federal Reserve Bank of St. Louis.
  33. Orphanides, Athanasios, 2000. "The quest for prosperity without inflation," Working Paper Series, European Central Bank 0015, European Central Bank.
  34. Fischer, Stanley, 1993. "The role of macroeconomic factors in growth," Journal of Monetary Economics, Elsevier, Elsevier, vol. 32(3), pages 485-512, December.
  35. Dupor, Bill, 2005. "Stabilizing non-fundamental asset price movements under discretion and limited information," Journal of Monetary Economics, Elsevier, Elsevier, vol. 52(4), pages 727-747, May.
  36. Ben S. Bernanke & Julio J. Rotemberg, 1997. "NBER Macroeconomics Annual 1997, Volume 12," NBER Books, National Bureau of Economic Research, Inc, National Bureau of Economic Research, Inc, number bern97-1.
  37. Calvo, Guillermo A, 1978. "On the Time Consistency of Optimal Policy in a Monetary Economy," Econometrica, Econometric Society, Econometric Society, vol. 46(6), pages 1411-28, November.
  38. Richard Clarida & Jordi Galí & Mark Gertler, 2000. "Monetary Policy Rules And Macroeconomic Stability: Evidence And Some Theory," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 115(1), pages 147-180, February.
  39. Frederic S. Mishkin & Niklas J. Westelius, 2006. "Inflation Band Targeting and Optimal Inflation Contracts," NBER Working Papers 12384, National Bureau of Economic Research, Inc.
  40. Richard Clarida & Jordi Galí & Mark Gertler, 1997. "The science of monetary policy: A new Keynesian perspective," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 356, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 1999.
  41. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "This Time Is Different: Eight Centuries of Financial Folly," Economics Books, Princeton University Press, Princeton University Press, edition 1, volume 1, number 8973.
  42. David Reifschneider & John C. Williams, 2000. "Three lessons for monetary policy in a low-inflation era," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, Federal Reserve Bank of Boston, pages 936-978.
  43. Frederic S. Mishkin & Klaus Schmidt-Hebbel, 2006. "Monetary Policy Under Inflation Targeting: An Introduction," Working Papers Central Bank of Chile, Central Bank of Chile 396, Central Bank of Chile.
  44. Adrian, Tobias & Song Shin, Hyun, 2010. "Financial Intermediaries and Monetary Economics," Handbook of Monetary Economics, Elsevier, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 12, pages 601-650 Elsevier.
  45. Claudio E. V. Borio & Wiliam English & Andrew Filardo, 2003. "A tale of two perspectives: old or new challenges for monetary policy?," BIS Working Papers 127, Bank for International Settlements.
  46. Joseph Gagnon & Matthew Raskin & Julie Remache & Brian Sack, 2010. "Large-scale asset purchases by the Federal Reserve: did they work?," Staff Reports, Federal Reserve Bank of New York 441, Federal Reserve Bank of New York.
  47. John B. Taylor, 1998. "An Historical Analysis of Monetary Policy Rules," NBER Working Papers 6768, National Bureau of Economic Research, Inc.
  48. Fatás, Antonio & Mihov, Ilian & Rose, Andrew K., 2006. "Quantitative goals for monetary policy," Working Paper Series, European Central Bank 0615, European Central Bank.
  49. Linda S. Goldberg & Craig Kennedy & Jason Miu, 2011. "Central bank dollar swap lines and overseas dollar funding costs," Economic Policy Review, Federal Reserve Bank of New York, Federal Reserve Bank of New York, issue May, pages 3-20.
  50. Jeremy Piger & James Morley & Chang-Jin Kim, 2005. "Nonlinearity and the permanent effects of recessions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 20(2), pages 291-309.
  51. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers, Massachusetts Institute of Technology (MIT), Sloan School of Management 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  52. Gauti B. Eggertsson & Michael Woodford, 2004. "Policy Options in a Liquidity Trap," American Economic Review, American Economic Association, American Economic Association, vol. 94(2), pages 76-79, May.
  53. Schmidt-Hebbel, Klaus & Tapia, Matias, 2002. "Inflation targeting in Chile," The North American Journal of Economics and Finance, Elsevier, Elsevier, vol. 13(2), pages 125-146, August.
  54. Jean boivin & Timothy Lane & Césaire Meh, 2010. "Should Monetary Policy Be Used to Counteract Financial Imbalances?," Bank of Canada Review, Bank of Canada, Bank of Canada, vol. 2010(Summer), pages 23-36.
  55. Sack, Brian, 2000. "Does the fed act gradually? A VAR analysis," Journal of Monetary Economics, Elsevier, Elsevier, vol. 46(1), pages 229-256, August.
  56. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, Elsevier, vol. 13(2), pages 187-221, June.
  57. Milton Friedman & Anna J. Schwartz, 1963. "A Monetary History of the United States, 1867-1960," NBER Books, National Bureau of Economic Research, Inc, National Bureau of Economic Research, Inc, number frie63-1.
  58. Jack Selody & Carolyn Wilkins, 2004. "Asset Prices and Monetary Policy: A Canadian Perspective on the Issues," Bank of Canada Review, Bank of Canada, Bank of Canada, vol. 2004(Autumn), pages 3-14.
  59. Marc P. Giannoni & Michael Woodford, 2003. "Optimal Inflation Targeting Rules," NBER Working Papers 9939, National Bureau of Economic Research, Inc.
  60. Leonardo Gambacorta, 2009. "Monetary policy and the risk-taking channel," BIS Quarterly Review, Bank for International Settlements, Bank for International Settlements, December.
  61. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 84(3), pages 488-500, August.
  62. Frederic S. Mishkin, 2011. "Over the Cliff: From the Subprime to the Global Financial Crisis," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 25(1), pages 49-70, Winter.
  63. Vestin, David, 2006. "Price-level versus inflation targeting," Journal of Monetary Economics, Elsevier, Elsevier, vol. 53(7), pages 1361-1376, October.
  64. Tobias Adrian & Hyun Song Shin, 2009. "Money, liquidity, and monetary policy," Staff Reports, Federal Reserve Bank of New York 360, Federal Reserve Bank of New York.
  65. Guy Debelle & Stanley Fischer, 1994. "How independent should a central bank be?," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, Federal Reserve Bank of Boston, vol. 38, pages 195-225.
  66. Mishkin, Frederic S., 1978. "The Household Balance Sheet and the Great Depression," The Journal of Economic History, Cambridge University Press, Cambridge University Press, vol. 38(04), pages 918-937, December.
  67. Charles W. Calomiris, 1993. "Financial Factors in the Great Depression," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 7(2), pages 61-85, Spring.
  68. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 85(3), pages 473-91, June.
  69. Tobias Adrian & Emanuel Moench & Hyun Song Shin, 2010. "Macro Risk Premium and Intermediary Balance Sheet Quantities," IMF Economic Review, Palgrave Macmillan, Palgrave Macmillan, vol. 58(1), pages 179-207, August.
  70. Barro, Robert J. & Gordon, David B., 1983. "Rules, discretion and reputation in a model of monetary policy," Journal of Monetary Economics, Elsevier, Elsevier, vol. 12(1), pages 101-121.
  71. Marvin Goodfriend, 1993. "Interest rate policy and the inflation scare problem: 1979-1992," Proceedings, Board of Governors of the Federal Reserve System (U.S.), Board of Governors of the Federal Reserve System (U.S.).
  72. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
  73. Alan Ahearne & Joseph Gagnon & Jane Haltmaier & Steve Kamin ... [et al.]., 2002. "Preventing deflation: lessons from Japan's experience in the 1990s," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 729, Board of Governors of the Federal Reserve System (U.S.).
  74. Gertler, Mark & Karadi, Peter, 2011. "A model of unconventional monetary policy," Journal of Monetary Economics, Elsevier, Elsevier, vol. 58(1), pages 17-34, January.
  75. Todd Keister, 2010. "Bailouts and financial fragility," Staff Reports, Federal Reserve Bank of New York 473, Federal Reserve Bank of New York.
  76. Alesina, Alberto & Summers, Lawrence H, 1993. "Central Bank Independence and Macroeconomic Performance: Some Comparative Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 25(2), pages 151-62, May.
  77. Michael Woodford, 2001. "Inflation Stabilization and Welfare," NBER Working Papers 8071, National Bureau of Economic Research, Inc.
  78. James Forder, 2000. "Traps in the Measurement of Independence and Accountability of Central Banks," Economics Series Working Papers, University of Oxford, Department of Economics 23, University of Oxford, Department of Economics.
  79. Robert Dittmar & William T. Gavin & Finn Kydland, 1999. "The inflation-output variability tradeoff and price-level targets," Review, Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, issue Jan, pages 23-32.
  80. Philip Turner, 2010. "Central banks and the financial crisis," BIS Papers chapters, Bank for International Settlements, in: Bank for International Settlements (ed.), Perspectives on inflation targeting, financial stability and the global crisis, volume 51, pages 21-25 Bank for International Settlements.
  81. Linus Wilson & Yan Wu, 2010. "Common (stock) sense about risk-shifting and bank bailouts," Financial Markets and Portfolio Management, Springer, Springer, vol. 24(1), pages 3-29, March.
  82. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, Elsevier, vol. 4(2), pages 103-124, April.
  83. John B. Taylor, 1999. "Introduction to "Monetary Policy Rules"," NBER Chapters, National Bureau of Economic Research, Inc, in: Monetary Policy Rules, pages 1-14 National Bureau of Economic Research, Inc.
  84. Ben S. Bernanke & Julio J. Rotemberg, 1997. "Editorial in "NBER Macroeconomics Annual 1997, Volume 12"," NBER Chapters, National Bureau of Economic Research, Inc, in: NBER Macroeconomics Annual 1997, Volume 12, pages 1-6 National Bureau of Economic Research, Inc.
  85. Raghuram G. Rajan, 2006. "Has Finance Made the World Riskier?," European Financial Management, European Financial Management Association, European Financial Management Association, vol. 12(4), pages 499-533.
  86. Ioannidou, V. & Ongena, S. & Peydro, J.L., 2009. "Monetary Policy, Risk-Taking, and Pricing: Evidence from a Quasi-Natural Experiment," Discussion Paper, Tilburg University, Center for Economic Research 2009-31 S, Tilburg University, Center for Economic Research.
  87. Vestin, David, 2000. "Price-level Targeting versus Inflation Targeting in a Forward-looking Model," Working Paper Series, Sveriges Riksbank (Central Bank of Sweden) 106, Sveriges Riksbank (Central Bank of Sweden).
Full references (including those not matched with items on IDEAS)

Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Po co bankom centralnym cel inflacyjny
    by k.mokrzycka in Obserwator Finansowy on 2012-02-27 05:29:46
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:16755. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.