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If only it was that easy. On the broadest strokes monetary policy effects tend to be delayed and do minor changes until you hit a tipping point then effects roc
by Gustomaximus 10y ago
If only it was that easy. On the broadest strokes monetary policy effects tend to be delayed and do minor changes until you hit a tipping point then effects rocket on a direction. No-one really knows where the tipping points are as there a bunch of variables and unknowns in every scenario so you dont really know until you 'found it'. The old quote something like "economics is someone looking backwards telling us why stuff happened".
Secondly, policy makers should manage monetary policy in conjugation with fiscal policy. But fiscal policy can a much harder political fight or have different groups/ideologies controlling it. So monetary policy often runs as a solus activity making its effectiveness limited.
- eru 10y agoIf long lags where a thing, wouldn't that lead to major arbitrage opportunities? See http://www.themoneyillusion.com/?p=6197 http://www.themoneyillusion.com/?p=6197 Monetary policy can always produce inflation, if the central banks wants it badly enough. You are right that better fiscal policy can be useful for the economy, too. (I'd like to see Georgism given an honest try again. Funny enough, that's a very orthodox economic suggestion. Just like free trade and free movement of labour.)