Working Paper: NBER ID: w16755
Authors: Frederic S. Mishkin
Abstract: This paper examines what we have learned and how we should change our thinking about monetary policy strategy in the aftermath of the 2007-2009 financial crisis. It starts with a discussion of where the science of monetary policy was before the crisis and how central banks viewed monetary policy strategy. It will then examine how the crisis has changed the thinking of both macro/monetary economists and central bankers. Finally, it looks how much of the science of monetary policy needs to be altered and draws implications for monetary policy strategy.
Keywords: Monetary Policy; Financial Crisis; Economic Strategy
JEL Codes: E44; E52; E58; G01
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| financial disruptions (F65) | economic activity (E20) |
| financial frictions (G19) | economic activity (E20) |
| economic downturns (F44) | uncertainty about asset values (G19) |
| uncertainty about asset values (G19) | financial instability (F65) |
| severity of economic shocks (F44) | limitations of traditional monetary policy tools (E52) |