Monetary Policy

Monetary Policy

Research

Jason E. Taylor, Andrea Castillo | Jan 13, 2015
A new study published by the Mercatus Center at George Mason University examines the use of expansionary fiscal policy to stimulate a contracting economy. The study concludes that attempts to use fiscal policy to solve broader economic troubles have failed even by the theory proponents’ own standards. In addition to being poorly timed and targeted, stimulus spending has led to permanent increases in the size and scope of government.
Alexander Salter | Dec 04, 2014
In a new study for the Mercatus Center at George Mason University, scholar Alexander William Salter examines several different proposed rules that the Fed could follow. Salter provides a framework to help policymakers better understand how incentives and information can affect monetary policy and discusses discretion-based and rule-based approaches to monetary policy.
Jeffrey Rogers Hummel | Sep 16, 2014
Many economists and economic commentators fear that the Federal Reserve does not have an adequate exit strategy from the quantitative easing that took place during the financial crisis. Its bloated balance sheet has allegedly left a looming monetary overhang that the Fed will not be able to manage once the economy returns to normal.
David Beckworth | Jul 10, 2014
Inflation targeting emerged in the early 1990s and soon became the dominant monetary-policy regime. It provided a much-needed nominal anchor that had been missing since the collapse of the Bretton Woods system.
Benjamin M. Blau | Oct 24, 2013
This paper analyzes the characteristics of banks that received emergency loans from the Federal Reserve during the recent financial crisis. Using unique data consisting of emergency loan transactions, I provide evidence that larger banks, in terms of assets and market capitalization, were more likely to receive emergency support.
William Luther | Sep 17, 2013
Cryptocurrencies are digital alternatives to traditional government-issued paper monies. Given the current state of technology and skepticism regarding the future purchasing power of existing monies, why have cryptocurrencies failed to gain widespread acceptance?

Testimony & Comments

Expert Commentary

Feb 04, 2016

See if this sounds familiar. The economy is in a deep slump. The Fed cuts interest rates close to zero and then tries quantitative easing (QE). A banking crisis begins in the United States and then spreads to Europe, where even sovereign debt is no longer safe. Individual countries are locked into a single monetary regime and unable to stimulate their economies. Am I my describing the Great Recession? Yes, but I’m also describing the Great Depression of the early 1930s. Now let’s push the comparison a bit further.
Jan 14, 2016

The Fed began a new chapter in its history in December by raising interest rates for the first time in almost a decade. A key reason for this historic liftoff of interest rates is the belief by Fed Chair Janet Yellen and other monetary officials that the "natural" interest rate has risen and the Fed must follow suit. So what is this mysterious natural interest rate, and why must the Fed follow it?
Dec 04, 2015

In the debate over letting lawmakers scrutinize Federal Reserve Board policy, there is often confusion between telling the Fed what to do and just being able to know what the central bank does. While many disagree on exactly what level of independence the Fed should have, most will agree that there is some role for congressional oversight, or at least awareness, of monetary policy. For that oversight to occur, however, Congress must have a general understanding of what the Fed is doing, which is no easy task.
Sep 22, 2015

Among the general public, Milton Friedman is mostly remembered for the libertarian views outlined on his PBS show Free to Choose. Among economists, he is best known for his monetarist position on Fed policy. What's less well known is that he was also a soothsayer, accurately predicting the euro crisis that now has the global economy in upheaval. The Nobel laureate believed the boom-and-bust business cycle was mostly caused by central banking errors that allowed a country's money supply to fluctuate.
Jun 09, 2015

The popular cryptocurrency Bitcoin is fast approaching a critical technical challenge that will fundamentally shape the course of its future. If unaddressed, an arbitrary protocol quirk implemented by Bitcoin creator Satoshi Nakamoto as a short-term security measure could soon undermine Bitcoin’s scalability, usability, and even its long-term viability—although, as always, opinions differ.
Mar 30, 2015

As the world looks back on Lee's legacy, we should pay special attention to his contributions on responsible and effective governance over a three-decade reign as the city-state's prime minister.

Charts

This week’s chart is a re-creation of a chart produced by the Richmond Fed. The share of financial sector liabilities subject to implicit or explicit government protection from losses grew from 45 percent in 1999 to 60 percent in 2013 and amounts to a staggering $26 trillion.

Experts

Podcasts

Scott Sumner | December 17, 2015
The Federal Reserve recently decided to bump up interest rates to .25%. Scott Sumner discusses the implications of this decision on WVLK Radio.

Recent Events

Please join the Mercatus Center for a panel discussion on Federal Reserve reform.

Books

Scott Sumner | Dec 01, 2015
The Midas Paradox is a landmark treatise that solves mysteries that have long perplexed economic historians, and corrects misconceptions about the true causes, consequences, and cures of macroeconomic instability. Like Milton Friedman and Anna J. Schwartz’s A Monetary History of the United States, 1867–1960, it is one of those rare books destined to shape all future research on the subject.

Media Clippings

Benjamin M. Blau | Oct 27, 2013
Benjamin Blau cited at The Washington Examiner.
Benjamin M. Blau | Oct 24, 2013
Benjamin Blau cited at International Business Times.
Jerry Brito | Oct 03, 2013
Jerry Brito cited at The Wall Street Journal.
Jerry Brito | Oct 03, 2013
Jerry Brito cited at Los Angeles Times.
Jerry Brito | Oct 03, 2013
Jerry Brito cited at BBC.
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