three open questions on interest rate based policy
three open questions surrounding today’s
interest-rate-based policy structure: (1) Has the Federal Reserve solved
the “nominal anchor” problem inherent in interest-rate-based monetary
policymaking? If not, would a shift to explicit inflation targeting (along
the lines of what the Bank of England and the Swedish Riksbank, for
example, have done) be helpful? (2) Is there a role in the monetary
policymaking process for interest rates other than the federal funds rate,
or whatever particular rate the Federal Reserve chooses to set? Equivalently,
is there a role for the prices of financial assets, including equities?
(3) To what extent does the electronic revolution now under way in
44 Benjamin M. Friedman
banking, and in business more generally, threaten the efficacy of interestrate-
based monetary policymaking?
- posted by Mark Pane @ 7:41 PM