The Evolution of U.S. Monetary Policy

Hetzel, Robert L.

doi:10.21144/wp18-01

Cited by 15 publications

(11 citation statements)

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“…This view, though, raises the question about why the ECB tightened its policy during these times. Hetzel (, ) shows that, in both cases, the ECB was mistakenly worried about the rise in headline inflation, which both times had been caused by a temporary surge in commodity prices. This can be seen in panels G, H, and I of Figure , which show that core inflation remained stable even as headline inflation temporarily grew in 2008 and again in 2010–2011.…”

Section: Policy Implications For the Eurozonementioning

confidence: 99%

“…This flow of capital out of periphery country banks and into core country banks further intensified regional differences in the eurozone. See Hetzel () for more on this point.…”

mentioning

confidence: 99%

“…The concern was misplaced, though, because the surge in inflation was caused by a temporary rise in commodity prices. See Hetzel () for more on this point.…”

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confidence: 99%

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The monetary policy origins of the eurozone crisis

Beckworth

2017

International Finance

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The eurozone crisis represents one of the greatest economic tragedies of the past century. It has caused immense human suffering, which continues to this day. The standard view attributes the economic crisis to an earlier buildup of public and private debt that was augmented by the imposition of austerity during the crisis. Although evidence exists of a relationship between the debt buildup, austerity measures, and economic growth during the crisis, that same evidence, on closer examination, points to eurozone countries’ common monetary policy as the real culprit behind the area's sharp decline in economic activity. In particular, it seems that the European Central Bank's tightening of monetary policy in 2008 and again in 2010–2011 not only caused two recessions but also sparked the sovereign debt crisis and gave teeth to the austerity programs. Such findings point to the need for a new monetary policy regime in the eurozone. The case is made for the new regime to be a targeted growth path for total money spending.

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Section: Policy Implications For the Eurozonementioning

confidence: 99%

“…This flow of capital out of periphery country banks and into core country banks further intensified regional differences in the eurozone. See Hetzel () for more on this point.…”

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confidence: 99%

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The monetary policy origins of the eurozone crisis

Beckworth

2017

International Finance

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“…Or, to state it differently: how was the monetary 'orthodoxy' of the time challenged by the extraordinary requirements of war -was the understanding of how monetary policy works affected by this exercise in wartime or was it viewed merely as an aberration? 26 In the literature, unanimously, the famous Fed Treasury Accord of 1951 marks the beginning of the modern era for the Fed, characterised by the pursuit of full employment and price stability, with the potential trade-off between the two goals Hetzel, 2018). The 'golden age' of the US central bank is thus associated with the 1950s, when the Fed was able to be responsive to the needs of the domestic economy, and when its policy started to be correctly apprehended as a reaction function and estimated as a Taylor rule (meaning the Fed actually monitored inflation and the business cycle).…”

Section: Discussion: Are Dissent and Debates During The War Marking Tmentioning

confidence: 99%

Debates and dissent inside the FOMC during WWII

2018

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We demonstrate that even though during WWII the interest rate was close to zero supporting the financing of the military effort, dissent inside the FOMC occurred with a similar frequency to other policy episodes. Our analysis highlights that the debates which resulted in dissents turned around two broad issues: the size of the Fed's balance sheet as well as the functioning of and communication with financial markets. Thus, we argue that the conventional view depicting the Fed as merely accommodating treasury needs should be revised. Our detailed investigation of dissents emphasises the modernity of the objections raised by Fed officials.

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“…However, Gertler and Karadi (2015) offer evidence on the nature of the monetary policy transmission mechanism. A detailed exposition of U.S. monetary policy during the past 100 years is presented in Hetzel and Richardson (2016) .…”

Section: Modeling Unconventional Monetary Policymentioning

confidence: 99%

Modeling U.S. monetary policy during the global financial crisis and lessons for Covid-19

Bhar

Malliaris

2021

Journal of Policy Modeling

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The paper formulates the modeling of unconventional monetary policy and critically evaluates its effectiveness to address the Global Financial Crisis. We begin with certain principles guiding general scientific modeling and focus on Milton Friedman's 1968 Presidential Address that delineates the strengths and limitations of monetary policy to pursue certain goals. The modeling of monetary policy with its novelty of quantitative easing to target unusually high unemployment is evaluated by a Markov switching econometric model using monthly data for the period 2002-2015. We conclude by relating the lessons learned from unconventional monetary policy during the Global Financial Crisis to the recent bold initiatives of the Fed to mitigate the economic and financial impact of the Covid-19 pandemic on U.S. households and businesses.

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The Evolution of U.S. Monetary Policy

Abstract: JEL: E52 and E58

Cited by 15 publications

References 11 publications

The monetary policy origins of the eurozone crisis

The monetary policy origins of the eurozone crisis

Debates and dissent inside the FOMC during WWII

Modeling U.S. monetary policy during the global financial crisis and lessons for Covid-19

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