U.S. Monetary Policy in Disarray
Networks Financial Institute Working Paper No. 2011-WP-21b
43 Pages Posted: 26 Aug 2011 Last revised: 14 Apr 2013
Date Written: February 2013
Monetary policy became more difficult to characterize during and after the mortgage foreclose and financial crises because of a shift to a new credit policy focused on private sector credit and that relies on traditional commercial banking strategies. The new credit policy broke the tight link that had existed between Fed credit and its effective monetary base, the monetary base that affects monetary aggregates. The Fed has adopted an exit strategy, but the discretionary powers that it followed remain in place as does a mistaken policy on the payment of interest on excess reserves.
Keywords: monetary policy, credit policy, central banking, Milton Friedman, business cycles
JEL Classification: E3, E5
Suggested Citation: Suggested Citation