Is monetary policy overburdened?

  • Following the experience of the global financial crisis, central banks have been asked to undertake unprecedented responsibilities. Governments and the public appear to have high expectations that monetary policy can provide solutions to problems that do not necessarily fit in the realm of traditional monetary policy. This paper examines three broad public policy goals that may overburden monetary policy: full employment; fiscal sustainability; and financial stability. While central banks have a crucial position in public policy, the appropriate policy mix also involves other institutions, and overreliance on monetary policy to achieve these goals is bound to disappoint. Central Bank policies that facilitate postponement of needed policy actions by governments may also have longer-term adverse consequences that could outweigh more immediate benefits. Overburdening monetary policy may eventually diminish and compromise the independence and credibility of the central bank, thereby reducing its effectiveness to preserve price stability and contribute to crisis management.

Download full text files

Export metadata

Additional Services

Share in Twitter Search Google Scholar
Metadaten
Author:Athanasios OrphanidesORCiDGND
URN:urn:nbn:de:hebis:30:3-331999
URL:http://www.imfs-frankfurt.de/fileadmin/user_upload/pdf/IMFS_WP_75.pdf
Parent Title (German):Working paper series / Institute for Monetary and Financial Stability ; 75
Series (Serial Number):Working Paper Series : Institute for Monetary and Financial Stability (75)
Publisher:Johann Wolfgang Goethe-Univ., Inst. for Monetary and Financial Stability
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Year of Completion:2013
Year of first Publication:2013
Publishing Institution:Universit├Ątsbibliothek Johann Christian Senckenberg
Release Date:2014/03/03
Tag:Global financial crisis; central bank independence; financial stability; fiscal dominance; monetary policy real-time output gap
HeBIS-PPN:344384284
Institutes:Wissenschaftliche Zentren und koordinierte Programme / Institute for Monetary and Financial Stability (IMFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Sammlungen:Universit├Ątspublikationen
Licence (German):License LogoDeutsches Urheberrecht