Monetary Policy Strategy: How Did We Get Here?
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.
This paper is the introductory chapter in my book, "Monetary Policy Strategy", forthcoming from MIT Press. I thank my editor Elizabeth Murry for her extremely helpful comments. Any views expressed in this paper are those of the author only and not those of Columbia University or the National Bureau of Economic Research. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.
Frederic S. Mishkin, 2006. "Monetary Policy Strategy: How Did We Get Here?," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 53(4), pages 359-388, December. citation courtesy of