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How not to do monetary policy

In: Post-Keynesian Economics for the Future

Author

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  • Louis-Philippe Rochon

Abstract

With inflation having now roared back in a pan-pandemic world, central banks and monetary policy have been thrown back into the spotlight. After having left interest rates at or near the lower bound for many years, interest rates have been raised again in an effort to tame the inflation beast. But questions remain about the efficiency of monetary policy in doing so. In this short contribution, I consider the standard understanding of the transmission mechanism of monetary policy and reveal how it lacks empirical support. In the end, monetary policy may not be the best way to deal with inflation, especially when it is not driven by demand forces.

Suggested Citation

  • Louis-Philippe Rochon, 2024. "How not to do monetary policy," Chapters, in: Jesper Jespersen & Finn Olesen & Mikael R. Byrialsen (ed.), Post-Keynesian Economics for the Future, chapter 9, pages 140-151, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:22103_9
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    File URL: https://www.elgaronline.com/doi/10.4337/9781035307517.00017
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    Keywords

    Economics and Finance;

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