Does the Crisis Experience Call for a New Paradigm in Monetary Policy?
AbstractThis paper shows that the monetary policy paradigm that was in place before the financial crisis worked very well and that the crisis occurred only after policy makers deviated from that paradigm. The paper also evaluates monetary policy during the financial crisis by dividing the crisis into three periods: pre-panic, panic and post-panic. It shows that the extraordinary measures did not work well in the pre-panic or the post-panic periods; instead they helped bring on the panic, even though they may have some positive impact during the panic. The implication of the paper is that the crisis does not call for a new paradigm for monetary policy.
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Bibliographic InfoPaper provided by CASE-Center for Social and Economic Research in its series CASE Network Studies and Analyses with number 402.
Length: 22 Pages
Date of creation: 2010
Date of revision:
financial crisis; monetary policy rule; Taylor rule; quantitative easing;
Find related papers by JEL classification:
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- G01 - Financial Economics - - General - - - Financial Crises
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-08-06 (All new papers)
- NEP-CBA-2010-08-06 (Central Banking)
- NEP-HPE-2010-08-06 (History & Philosophy of Economics)
- NEP-MAC-2010-08-06 (Macroeconomics)
- NEP-MON-2010-08-06 (Monetary Economics)
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.:
- John C. Williams & John B. Taylor, 2009.
"A Black Swan in the Money Market,"
American Economic Journal: Macroeconomics,
American Economic Association, vol. 1(1), pages 58-83, January.
- Tobias Adrian & Christopher R. Burke & James J. McAndrews, 2009. "The Federal Reserve's Primary Dealer Credit Facility," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 15(Aug).
- Todd Keister & James McAndrews, 2009.
"Why are banks holding so many excess reserves?,"
380, Federal Reserve Bank of New York.
- Daniel L. Thornton, 2009. "Negating the inflation potential of the Fed's lending programs," Economic Synopses, Federal Reserve Bank of St. Louis.
- Johannes C. Stroebel & John B. Taylor, 2009. "Estimated Impact of the Fed’s Mortgage-Backed Securities Purchase Program," NBER Working Papers 15626, National Bureau of Economic Research, Inc.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Teaching Modern Macroeconomics at the Principles Level â Pre crisis
by Amol Agrawal in Mostly Economics on 2010-08-13 07:06:40
- Monetary economics is hard
by Ajay Shah in Ajay Shah's blog on 2010-08-10 15:57:00
- Romneynomics is really just neoclassical economics in 2012
by Dirk in econoblog101 on 2012-10-23 21:30:41
- Eva Zamrazilová, 2011. "Monetary Policy: Old Lessons and New Challenges," Politická ekonomie, University of Economics, Prague, vol. 2011(1), pages 3-21.
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