Lessons for Monetary Policy: What Should the Consensus Be?

April 1, 2011

Preview Citation

Format: Chicago

Otmar Issing. Lessons for Monetary Policy: What Should the Consensus Be?, (USA: International Monetary Fund, 2011) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper outlines important lessons for monetary policy. In particular, the role of inflation targeting, which was much acclaimed prior to the financial crisis and since then has not lost much of its endorsement, is critically reviewed. Ignoring the relation between monetary policy and asset prices, as is the case in this monetary policy approach, can lead to financial instability. In contrast, giving, inter alia, monetary factors a role in central banks’ policy decisions, as is done in the ECB’s encompassing approach, helps prevent these potentially harmful side effects and thus allows for fostering financial stability. Finally, this paper makes a case against increasing the central banks’ inflation target.

Subject: Asset prices, Banking, Inflation, Inflation targeting, Price stabilization

Keywords: Central bank, Inflation-targeting central bank, Interest rate, Monetary policy, WP

Publication Details

Pages:

18
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2011/097
Stock No:

WPIEA2011097
ISBN:

9781455254286
ISSN:

1018-5941

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