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Successes and Failures of Monetary Policy Since the 1950s

Successes and failures in monetary policy stem mainly from coherence or lack thereof in the monetary order, rather than the tactical skills of policy makers. Crucial here are questions of consistency among the economic ideas that the policy regime embodies, the way in which the economy actually functions, and the beliefs of private agents and policy makers about these matters. These postulates are used to frame accounts of the Bretton Woods System and its collapse, the Great Inflation that followed, the subsequent disappointing performance of money-growth targeting, the breakdown of the Japanese "bubble economy" the onset of theEMS crisis at the beginning of the 1990s, and since then, the launch of the Euro and the apparent success of inflation targeting. Though monetary policy seems rather successful at present, certain weaknesses in currently prevailing monetary orders are noted.

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Paper provided by University of Western Ontario, Economic Policy Research Institute in its series University of Western Ontario, Economic Policy Research Institute Working Papers with number 20072.

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Date of creation: 2007
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Handle: RePEc:uwo:epuwoc:20072
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  1. Lars E.O. Svensson, 2003. "Escaping from a Liquidity Trap and Deflation: The Foolproof Way and Others," NBER Working Papers 10195, National Bureau of Economic Research, Inc.
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  3. Woodford, Michael, 2007. "How Important is Money in the Conduct of Monetary Policy?," CEPR Discussion Papers 6211, C.E.P.R. Discussion Papers.
  4. Milton Friedman, 1959. "The Demand for Money: Some Theoretical and Empirical Results," Journal of Political Economy, University of Chicago Press, vol. 67, pages 327.
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  7. David Laidler & William B.P. Robson, 2004. "Two Percent Target: Canadian Monetary Policy Since 1991," C.D. Howe Institute Policy Studies, C.D. Howe Institute, number 20041, July.
  8. Scott Roger & Mark R. Stone, 2005. "On Target? the International Experience with Achieving Inflation Targets," IMF Working Papers 05/163, International Monetary Fund.
  9. Benjamin M. Friedman, 1984. "Lessons from the 1979-1982 Monetary Policy Experiment," NBER Working Papers 1272, National Bureau of Economic Research, Inc.
  10. Darby, Michael R. & Lothian, James R. & Gandolfi, Arthur E. & Schwartz, Anna J., 1983. "The International Transmission of Inflation," National Bureau of Economic Research Books, University of Chicago Press, edition 0, number 9780226136417.
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  12. Paul R. Krugman, 1998. "It's Baaack: Japan's Slump and the Return of the Liquidity Trap," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 137-206.
  13. David Laidler, 2003. "The Price Level, Relative Prices, and Economic Stability: Aspects of the Inter-War Debate," UWO Department of Economics Working Papers 200310, University of Western Ontario, Department of Economics.
  14. Philip Lowe & Claudio Borio, 2002. "Asset prices, financial and monetary stability: exploring the nexus," BIS Working Papers 114, Bank for International Settlements.
  15. Laidler, David E W & Parkin, J Michael, 1975. "Inflation: A Survey," Economic Journal, Royal Economic Society, vol. 85(340), pages 741-809, December.
  16. Charles Goodhart, 2007. "Whatever became of the Monetary Aggregates?," FMG Special Papers sp172, Financial Markets Group.
  17. David Laidler, 2004. "Monetary Policy after Bubbles Burst: The Zero Lower Bound, the Liquidity Trap and the Credit Deadlock," Canadian Public Policy, University of Toronto Press, vol. 30(3), pages 333-340, September.
  18. Athanasios Orphanides, 2002. "Monetary-Policy Rules and the Great Inflation," American Economic Review, American Economic Association, vol. 92(2), pages 115-120, May.
  19. Axel Leijonhufvud, 1994. "High inflations and the financial System," Estudios de Economia, University of Chile, Department of Economics, vol. 21(2 Year 19), pages 163-177, December.
  20. Filippo Cesarano, 2006. "The Origins of the Theory of Optimum Currency Areas," History of Political Economy, Duke University Press, vol. 38(4), pages 711-731, Winter.
  21. Heymann, Daniel & Sanguinetti, Pablo, 1994. "Fiscal inconsistencies and high inflation," Journal of Development Economics, Elsevier, vol. 43(1), pages 85-104, February.
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