Monetary Policy Strategy: How Did We Get Here?

46 Pages Posted: 19 Sep 2006 Last revised: 13 Sep 2010

See all articles by Frederic S. Mishkin

Frederic S. Mishkin

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Date Written: September 2006

Abstract

This paper, which is the introductory chapter in my book, "Monetary Policy Strategy", forthcoming from MIT Press, outlines how thinking in academia and central banks about monetary policy strategy has evolved over time. It shows that six ideas that are now accepted by monetary authorities and governments in almost all countries of the world have led to improved monetary performance: 1) there is no long-run tradeoff between output (employment) and inflation; 2) expectations are critical to monetary policy outcomes; 3) inflation has high costs; 4) monetary policy is subject to the time-inconsistency problem; 5) central bank independence helps improve the efficacy of monetary policy; and 6) a strong nominal anchor is the key to producing good monetary policy outcomes.

Suggested Citation

Mishkin, Frederic S., Monetary Policy Strategy: How Did We Get Here? (September 2006). NBER Working Paper No. w12515. Available at SSRN: https://ssrn.com/abstract=930333

Frederic S. Mishkin (Contact Author)

Columbia Business School - Finance and Economics ( email )

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National Bureau of Economic Research (NBER)

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