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The Need to Return to a Monetary Framework

Author

Listed:
  • John Taylor

    () (Stanford University)

Abstract

This paper examines the 100-fold increase in reserve balances at the Fed during the second half of 2008. By looking at the balance sheet of the Fed and the factors influencing the supply and demand for reserves, the paper shows that the increase was due to large purchases of securities and loans to certain sectors and institutions. Such actions constitute a combination of monetary policy and industrial policy, which might be called mondustrial policy. This characterization raises questions about the role of the Fed and suggests the need to return to a monetary framework.

Suggested Citation

  • John Taylor, 2009. "The Need to Return to a Monetary Framework," Discussion Papers 08-020, Stanford Institute for Economic Policy Research.
  • Handle: RePEc:sip:dpaper:08-020
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    File URL: http://www-siepr.stanford.edu/repec/sip/08-020.pdf
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    Citations

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    Cited by:

    1. Alesina, Alberto & Stella, Andrea, 2010. "The Politics of Monetary Policy," Handbook of Monetary Economics,in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 18, pages 1001-1054 Elsevier.
    2. Creel, Jérôme & Hubert, Paul, 2015. "Has Inflation Targeting Changed The Conduct Of Monetary Policy?," Macroeconomic Dynamics, Cambridge University Press, vol. 19(01), pages 1-21, January.
    3. Ratti, Ronald A. & Vespignani, Joaquin L., 2013. "Liquidity and crude oil prices: China's influence over 1996–2011," Economic Modelling, Elsevier, vol. 33(C), pages 517-525.
    4. Ratti, Ronald & Vespignani, Joaquin, 2012. "Liquidity and crude oil prices: China’s influence over 1996-2011," Working Papers 15062, University of Tasmania, Tasmanian School of Business and Economics, revised 20 Sep 2012.
    5. repec:eee:jmacro:v:54:y:2017:i:pa:p:42-58 is not listed on IDEAS
    6. Michael T. Belongia & Peter N. Ireland, 2016. "Targeting Constant Money Growth at the Zero Lower Bound," Boston College Working Papers in Economics 913, Boston College Department of Economics.
    7. Marius Constantin APOSTOAIE & Stefan MATEI, 2012. "Mutations at the Level of the Measures Adopted by Monetary Authorities," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 2, pages 53-60.
    8. Dermot Hodson & Deborah Mabbett, 2009. "UK Economic Policy and the Global Financial Crisis: Paradigm Lost?," Journal of Common Market Studies, Wiley Blackwell, vol. 47, pages 1041-1061, November.
    9. Drakos, Anastassios A. & Kouretas, Georgios P., 2015. "The conduct of monetary policy in the Eurozone before and after the financial crisis," Economic Modelling, Elsevier, vol. 48(C), pages 83-92.
    10. Belongia, Michael T. & Ireland, Peter N., 2017. "Circumventing the zero lower bound with monetary policy rules based on money," Journal of Macroeconomics, Elsevier, vol. 54(PA), pages 42-58.
    11. Browne, Frank & Kelly, Robert, 2009. "Money and uncertainty in democratised financial markets," Research Technical Papers 16/RT/09, Central Bank of Ireland.
    12. Maciej Ryczkowski, 2016. "Modern central banking from monetary perspective," Ekonomia i Prawo, Uniwersytet Mikolaja Kopernika, vol. 15(4), pages 547-556, December.
    13. repec:wsi:jicepx:v:01:y:2010:i:01:n:s1793993310000081 is not listed on IDEAS
    14. Claudio Borio & Piti Disyatat, 2010. "Unconventional Monetary Policies: An Appraisal," Manchester School, University of Manchester, vol. 78(s1), pages 53-89, September.
    15. John B. Taylor, 2010. "Commentary: monetary policy after the fall," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 337-348.
    16. Fernandez, Adriana Z. & Koenig, Evan F. & Nikolsko-Rzhevskyy, Alex, 2010. "Can alternative Taylor-rule specifications describe Federal Reserve policy decisions?," Journal of Policy Modeling, Elsevier, vol. 32(6), pages 733-757, November.

    More about this item

    Keywords

    2008; Fed Balance Sheet; Monetary Framework;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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