What Monetary Policy after the Crisis?
The objective of this paper is to reflect on some of the implications that recent economic experience has for monetary and financial stability policies. We contend that the financial crisis and the upsurge in inflation 2007-08 have shown that the policy model based on the new consensus in macroeconomics, which largely held sway over the past decade or more, is broken. It is argued that inflation targeting cannot deliver low inflation. We argue that fine-tuning through interest rates should not be attempted, but rather a constant real interest rate target based on the output growth rate should be adopted. The key objective of monetary policy should be shifted to financial stability, the independence of central banks should be brought to an end, and their decision making should be coordinated with other macroeconomic policy initiatives.
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 22 (2010)
Issue (Month): 4 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/CRPE20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/CRPE20|
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.:
- Alvaro Angeriz & Philip Arestis, 2008.
"Assessing inflation targeting through intervention analysis,"
Oxford Economic Papers,
Oxford University Press, vol. 60(2), pages 293-317, April.
- Alvaro Angeriz & Philip Arestis, 2007. "Assessing Inflation Targeting Through Intervention Analysis," Money Macro and Finance (MMF) Research Group Conference 2006 87, Money Macro and Finance Research Group.
- Philip Arestis, 2009. "New Consensus Macroeconomics: A Critical Appraisal," Economics Working Paper Archive wp_564, Levy Economics Institute.
- Forder, James, 1998. "The case for an independent European central bank: A reassessment of evidence and sources," European Journal of Political Economy, Elsevier, vol. 14(1), pages 53-71, February.
- Philip Arestis & Georgios E Chortareas, 2008. "Atheoretical and Theory-Based Approaches to the Natural Equilibrium Real Interest Rate," Eastern Economic Journal, Palgrave Macmillan, vol. 34(3), pages 390-405.
- Philip Arestis & Luiz Fernando de Paula & Fernando Ferrari-Filho, 2008.
"Inflation Targeting in Brazil,"
Economics Working Paper Archive
wp_544, Levy Economics Institute.
- Michael J. Dueker & Andreas M. Fischer, 2006. "Do inflation targeters outperform non-targeters?," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 431-450.
- Alvaro Angeriz & Philip Arestis, 2007. "Monetary policy in the UK," Cambridge Journal of Economics, Oxford University Press, vol. 31(6), pages 863-884, November.
- Fabian Valencia & Luc Laeven, 2008. "Systemic Banking Crises; A New Database," IMF Working Papers 08/224, International Monetary Fund.
- Philip Arestis & Malcolm Sawyer, 2008. "A critical reconsideration of the foundations of monetary policy in the new consensus macroeconomics framework," Cambridge Journal of Economics, Oxford University Press, vol. 32(5), pages 761-779, September.
- Philip Arestis & Malcolm Sawyer, 2010. "The return of fiscal policy," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 32(3), pages 327-346, April.
- Claude Gnos & Louis-Philippe Rochon (ed.), 2006. "Post-Keynesian Principles of Economic Policy," Books, Edward Elgar, number 3407, 6.
- Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
- Arestis, Philip & Sawyer, Malcolm, 2008. "New consensus macroeconomics and inflation targeting: Keynesian critique," Revista Economia e Sociedade, Instituto de Economia, Universidade Estadual de Campinas (UNICAMP), vol. 35, pages 25, April.
- Philip Arestis & Malcolm Sawyer, 2002.
"Can Monetary Policy Affect The Real Economy?,"
Economics Working Paper Archive
wp_355, Levy Economics Institute.
- Malcolm Sawyer, 2009. "Interest rates and inflation: What are the links?," European Journal of Economics and Economic Policies: Intervention, Edward Elgar, vol. 6(1), pages 81-96.
- Forder, James, 1998. "Central Bank Independence--Conceptual Clarifications and Interim Assessment," Oxford Economic Papers, Oxford University Press, vol. 50(3), pages 307-34, July.
- Axel A. Weber & Wolfgang Lemke & Andreas Worms, 2008. "How useful is the concept of the natural real rate of interest for monetary policy?," Cambridge Journal of Economics, Oxford University Press, vol. 32(1), pages 49-63, January.
When requesting a correction, please mention this item's handle: RePEc:taf:revpoe:v:22:y:2010:i:4:p:499-515. 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: (Michael McNulty)
If references are entirely missing, you can add them using this form.