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Monetary policy, money, and inflation

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Abstract

Textbook monetary theory holds that increasing the money supply leads to higher inflation. However, the Federal Reserve has tripled the monetary base since 2008 without inflation surging. With interest rates at historically low levels and the economy still struggling, the normal money multiplier process has broken down and inflation pressures remain subdued. This Letter is adapted from a presentation by the president and CEO of the Federal Reserve Bank of San Francisco to the Western Economic Association International on July 2, 2012.

Suggested Citation

  • John C. Williams, 2012. "Monetary policy, money, and inflation," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue july9.
    • Handle: RePEc:fip:fedfel:y:2012:i:july9:n:2012-21
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    Citations

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    Cited by:

    1. William A. Branch & John B. Carlson & George W. Evans & Bruce McGough, 2006. "Adaptive learning, endogenous inattention, and changes in monetary policy," Working Papers (Old Series) 0610, Federal Reserve Bank of Cleveland.
    2. Orphanides, Athanasios & Williams, John C., 2005. "The decline of activist stabilization policy: Natural rate misperceptions, learning, and expectations," Journal of Economic Dynamics and Control, Elsevier, vol. 29(11), pages 1927-1950, November.
    3. Athanasios Orphanides & John C. Williams, 2005. "Inflation scares and forecast-based monetary policy," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(2), pages 498-527, April.
    4. John C. Williams, 2012. "The Federal Reserve’s unconventional policies," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue nov13.
    5. Jung, Alexander, 2018. "Does McCallum’s rule outperform Taylor’s rule during the financial crisis?," The Quarterly Review of Economics and Finance, Elsevier, vol. 69(C), pages 9-21.
    6. Malliaris, Anastasios G. & Malliaris, Mary E., 2023. "Where is the Euro Area headed? Restoration of price stability," Journal of Policy Modeling, Elsevier, vol. 45(4), pages 848-863.
    7. Fernando J. Pérez Forero, 2017. "Measuring the Stance of Monetary Policy in a Time-Varying," Working Papers 102, Peruvian Economic Association.
    8. repec:fip:fedfsp:y:2012:i:nov5 is not listed on IDEAS
    9. Nada Mora, 2014. "The weakened transmission of monetary policy to consumer loan rates," Economic Review, Federal Reserve Bank of Kansas City, issue Q I, pages 1-26.

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