Time-consistency and credible monetary policy after the crisis
The economic crisis and its aftermath have posed significant challenges to policymakers. To help meet those challenges, the Federal Reserve deployed several innovative policy tools to help relieve the stress in financial markets during the crisis. These tools have created their own significant challenges for the conduct of monetary policy in the post-crisis era. The wider range of policy options now available to policymakers makes it more difficult to credibly commit to a particular policy course, and this discretion poses a problem. This is because monetary policy is subject to a time-inconsistency problem. The new monetary policy tools introduced during the crisis can make such time-inconsistency problems worse by reinforcing the incentives for financial institutions or other sectors of the economy to take on excessive risk. In this article, Jim Nason and Charles Plosser discuss why it is important for central banks to consider ways in which they can limit discretion and use these new tools in a systematic way.
Volume (Year): (2012)
Issue (Month): Q2 ()
|Contact details of provider:|| Postal: |
Web page: http://www.philadelphiafed.org/
More information through EDIRC
|Order Information:|| Web: http://www.phil.frb.org/publicaffairs/pubs/index.html Email: |
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.:
- John B. Taylor, 1999.
"A Historical Analysis of Monetary Policy Rules,"
in: Monetary Policy Rules, pages 319-348
National Bureau of Economic Research, Inc.
- John B. Taylor, 1999. "Monetary Policy Rules," NBER Books, National Bureau of Economic Research, Inc, number tayl99-1, December.
- Todd Keister & Antoine Martin & James McAndrews, 2008. "Divorcing money from monetary policy," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 41-56.
- John B. Taylor, 1999. "Introduction to "Monetary Policy Rules"," NBER Chapters, in: Monetary Policy Rules, pages 1-14 National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:fip:fedpbr:y:2012:i:q2:p:19-26. 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: (Beth Paul)
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.