To Students

Teaching and learning monetary economics in a time of crisis can quite exiting, and quite challenging too. New information, new research and new analysis change our field of study everyday. This blog is an instrument to keep track of these changes and link what we do in class with what is happening in the wide world. I will use the blog to point out things that I consider important and interesting (or just funny) - please contribute yourself, use it as a discussion platform, use it to exchange informations.


Just to Start

Ideally you should read the book - In the meantime you can watch the TV version of Niall Fergusson "The Ascent of Money" - history matters!

Thursday, September 2, 2010

The central bankers' burden

from Anthony Spyron

I thought this article is interesting in that it opens up the debate about the polarisation of monetary policy. Who is right and who is wrong ? Is it too soon to start tightening monetary policy through an increase in interest rates ? Is deflation a real possibility in some countries and how do central banks with very low rates counteract this danger ? Will tighter monetary control at this stage threaten economic recovery ?


I think deflation is unlikely at this stage. Consumer spending is gradually increasing and the longer there is no double dip the more confidence will increase (driving demand and increasing prices once again). I feel rates should in most cases remain constant for now with the exception of countries where recovery is already fully underway and where inflation has picked up. The real danger is how to introduce austerity measures in a still fragile period of recovery. It is also evident that monetary and fiscal policy need to be aligned.


It is certainly an interesting article. One aspect mentioned in the article that we will have to analyse further is the relationship between monetary policy and fiscal policy. One thing that the crisis has shown clearly is that monetary policy is just one instrument and not necessarily the most powerful - the fiscal instrument can have stronger and long lasting effects, but we have only imprecise knowledge on how the two instrument interact. Thank you for the contribution, it is exactly what I was looking for.
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1 comment:

  1. Shaakira KarloliaSeptember 6, 2010 at 7:15 AM

    This is an interesting article and is very much related to some of the other measures being proposed with respect to fiscal and monetary policy. As in the wake of the Great Depression, and thereafter, as well as other post-crisis, and sometimes pre-crisis periods, conventional policies could obviously not be relied upon; hence there is an obvious and apparent need for responsible innovation within this area.

    Caballero has proposed a "gift" from the Fed to the Treasury , "a helicopter drop" due to the lack of instruments available to the Fed at the moment, a proposed measure that will probably receive much criticism.

    The article is available at: http://www.voxeu.org/index.php?q=node/5449

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