Monetarism rides again? US monetary policy in a world of quantitative easing

Le, Vo Phuong Mai ORCID: https://orcid.org/0000-0003-3374-9694, Meenagh, David ORCID: https://orcid.org/0000-0002-9930-7947 and Minford, Patrick ORCID: https://orcid.org/0000-0003-2499-935X 2016. Monetarism rides again? US monetary policy in a world of quantitative easing. Journal of International Financial Markets, Institutions and Money 44 , pp. 85-102. 10.1016/j.intfin.2016.04.011

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Abstract

In a model of banking we give money a role in providing cheap collateral; i.e. besides the Taylor Rule, monetary policy can affect the risk-premium by varying the supply of M0 in open market operations, so that even at the zero bound monetary policy is still effective, and fiscal policy still crowds out investment. A simple rule for making M0 respond to credit conditions can substantially enhance the economy's stability. This, in combination with Price-level or nominal GDP targeting rules for interest rates, stabilises the economy further, making aggressive and distortionary regulation of banks' balance sheets redundant.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Advanced Research Computing @ Cardiff (ARCCA) Business (Including Economics)
Subjects:	H Social Sciences > HB Economic Theory
Publisher:	Elsevier
ISSN:	1042-4431
Date of First Compliant Deposit:	28 April 2016
Date of Acceptance:	27 April 2016
Last Modified:	12 Nov 2024 02:30
URI:	https://orca.cardiff.ac.uk/id/eprint/90099

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