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

Le, Vo Phuong Mai ORCID:, Meenagh, David ORCID: and Minford, Patrick ORCID: 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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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: 01 Nov 2022 18:36

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