Talk:Monetary policy

Various misplaced comments

could a logged-in user movethis article to "monetary policy of the USA" plase? Then we need non-country-specific articles on Monetary policy and Monetary theory (currently a redirect) -- tarquin (loggedout)

Did that -- now someone should sort out what parts of Monetary policy of the USA belongs in the general Monetary policy article and what is US specific. -- till we *) 14:13, Aug 15, 2003 (UTC)

Removed recap of the history of currency, since that is the article which should have those details, am going to add more on the expansion of monetary policy through the Bretton woods and floating currency eras, as well as the Mundell-Fleming model. Stirling Newberry 13:47, 15 Feb 2005 (UTC)

This article is still written almost entirely about current US policy and appears to have been so for years. I will be spending some time this month to clean it up. --Tylerdmace (talk) 20:02, 7 November 2008 (UTC)

Please, can economic experts relate this page and its relatives to the page Debt-based_monetary_system!

The article Debt-based_monetary_system stands currently unrelated to the bulk of the articles on monetary policy and closely related matters. What is worse, it is completely non NPOV, offering only critique of credit based money and absolutely no explanation of the point of such a system, cherry picking quotes of obscure figures and highlighting how many believe the system "leads to tyranny" and the like. It seems like the criticisms offered on this page should be incorporated into the currently existing pages, sobered up a great deal, and counterbalanced with criticisms of the criticisms. I tried to add one paragraph of more level headed context at the beginning, but I am not knowledgeable enough to do so authoritatively. 32F 14:57, 20 September 2007 (UTC)

Economic policy: please help!

I've just made a start at rewriting Economic policy covering fiscal and trade issues as well as monetary topics. Please join in! The Land 18:31, 15 November 2005 (UTC)

Article removed from Wikipedia:Good articles

This article was formerly listed as a good article, but was removed from the listing because

• There are no references.
• The lead section is way too short to provide a useful overview of the article subject.
• There are no images.

Please review Wikipedia:What is a good article. Slambo (Speak) 14:50, 23 March 2006 (UTC)

Failed GA

Four citations is not enough. Great basic summary, though. savidan^{(talk) (e@)} 04:20, 3 April 2006 (UTC)

How many citations should I add? Sasha Slutsker 01:09, 8 April 2006 (UTC)

I don't believe there to be a required number. The article needs to be sufficiently cited, and while 'sufficient' is always up for debate, I think you'd be safe if the majority of the article was cited.

Merge proposal

The following discussion is closed. Please do not modify it. Subsequent comments should be made in a new section. A summary of the conclusions reached follows.

Closing this discussion. For starters, no consensus developed. Secondly, Monetary theory redirects to monetary economics, so the merge is no longer valid. WTF? (talk) 23:30, 1 June 2013 (UTC)

---

Monetary theory and this article overlap, but since this article is much more completely developed, I propose merging monetary theory into monetary policy. (Given the refs there, this may also help restore MP to its GA status.) Jeremy Tobacman 19:02, 4 August 2007 (UTC)

Don't merge. Monetary theory may possibly be expanded to cover the different models of monetary economics such as the Quantity Theory of Money, Keynesian and post-Keynesian theories or the different attempts to incorporate money into dynamic general equilibrium. It may also discuss issues like the efficiency of monetary exchange vs. barter or the relationships between credit and money. None of this would be possible within an article on monetary policy. The references would also not help too much. I haven't seen the Edward Elgar book but the other books are more focussed on theory than on policy. Jyotirmoyb 08:40, 5 August 2007 (UTC)

Don't merge. The theory of what money is, and how it works, is a huge topic by itself; what macroconomic policies best control its effects is another field featuring 800-page textbooks. That is, I completely agree with Jyotirmoyb's comment. --Rinconsoleao 13:25, 16 August 2007 (UTC)

As I see it, in the most common current usage "monetary theory" and "monetary policy" are of the same central-bank-issued coin. Monetary theory is used to determine optimal monetary policy; historical variation, due partly to monetary policy, informs current prevailing theory. One well-regarded current six hundred page textbook sees fit to treat them together. Jyotirmoyb and Rinconsoleao, I think much of "what money is and how it works," including relation to barter, is now sensibly covered in the money article. Discussion of MV=PY, in my mind, fits well in an article on monetary policy, as it captures the first-order long-run lesson for central banks. Jeremy Tobacman 14:07, 16 August 2007 (UTC)

Why don't we merge "medical science" and "healthcare policy"? Why don't we merge "automaking" and "moving violation"? Why don't we merge "reproduction" and "family law"? Those overlap in about the same way. Go to it - you have a lot of WIKI ground to cover if you believe your own position. 76.247.107.101 15:38, 4 October 2007 (UTC)

Sure, given 600 pages, I agree that they could be treated together! But for Wikipedia's purposes, I think the money page, which discusses the nature of money for nonspecialists, should be linked to but separate from the monetary theory page, which should cover questions about how economists model money, including Baumol-Tobin, OLG, CIA, MIU, matching, and other classes of models. As Jyotirmoyb pointed out, theoretical treatment of efficiency of money, for example, also wouldn't fit will in the monetary policy page, which is very much a topic in its own right. --Rinconsoleao 11:35, 17 August 2007 (UTC)

The discussion above is closed. Please do not modify it. Subsequent comments should be made on the appropriate discussion page. No further edits should be made to this discussion.

Sterilization?

I can't find any page for the term Sterilization and it is also not mentioned on the pages for Economics and Monetary Policy. Perhaps it would make sense to include it somewhere. --Smallchanges 12:34, 2 September 2007 (UTC)

Managed float badly worded

The "managed float" section is very derogatory towards the Reserve Bank of India and seems to directly accuse it of lying. I think this is in desperate need of rewording, but unfortunately I know nothing of economics. —Preceding unsigned comment added by 80.42.87.105 (talk) 19:24, 22 January 2008 (UTC)

There is nothing derogatory about saying that some currency follows a managed float. And many central bank policies differ in practice from what they are officially called. Still, the statement about the Indian exchange rate regime lacks citations (or lacks a graph that would illustrate the claims). --Rinconsoleao (talk) 08:47, 23 January 2008 (UTC)

Why is the section on managed float almost entirely about India? Aren't there other countries that have managed floats too? Finnancier (talk) 14:33, 1 February 2008 (UTC)

I have removed the entire section for the time being. It was so poorly written that it will take a bit of work to cite and rewrite into a presentable form. I'll be working on it and will reintroduce it to the article when I am done. --Tylerdmace (talk) 07:06, 11 November 2008 (UTC)

Another type of monetary policy

The section Monetary policy#Types of monetary policy does not include the type of monetary policy which I advocate. It is described at User:JRSpriggs/Optimal monetary policy. I claim that a policy of maximal sustainable deflation is best. Is it OK to add this to the list in the article? JRSpriggs (talk) 20:45, 10 November 2008 (UTC)

I haven't had a chance to read through your ideology but off the top, I'd suggest trying to publish your ideas somewhere where they can then be referenced and an appropriate article regarding the policy could be created. --Tylerdmace (talk) 20:58, 10 November 2008 (UTC)

To Tylerdmace: Do you have any suggestions as to where I could get it published? Any comments on it yourself? Can you suggest any discussion groups on monetary policy where I could get criticism of the ideas from other people? JRSpriggs (talk) 19:16, 13 November 2008 (UTC)

The current financial crisis has created a lot of fear which is causing people to want to hold much more money than they previously felt they needed. The "stimulus packages" being offered by various politicians are woefully inadequate to provide that extra money, and they have other defects as well. My plan was developed during the Asian financial crisis of several years back. It would solve the current problem by having FRS buy huge amounts of stock and thus making the additional money needed available quickly without any increase in debt (which would defeat the purpose). JRSpriggs (talk) 19:16, 13 November 2008 (UTC)

Where is capital adequacy ?

No mention of capital adequacy in either this or money supply. These and monetary reform and fractional reserve banking all need to reflect that capital adequacy rules are what central banks really use to control credit - not "reserve requirements". These articles are very badly out of date.

Read Henry C K Liu's writings on this if you need references. He's got volumes. And someone should update the "Helicopter Ben" quote - he's no longer credible. Smoothing out variations indeed! —Preceding unsigned comment added by 142.177.92.153 (talk) 22:31, 25 November 2008 (UTC)

Enemies say Monetarism failed

Rinconsoleao (talk · contribs) edited the history section to include

Previously, monetarist macroeconomists advocated simply increasing the monetary supply at a low, constant rate, as the best way of maintaining low inflation and stable output growth. However, when this policy was attempted in the U.S. in the early 1980s, it was found to be highly destabilizing, a fact even Milton Friedman acknowledged in an interview with the Financial Times in 2003.

He used a speech by James K. Galbraith (an enemy of Monetarism) as his source, rather than the Financial Times. I think that this is at best hear-say rather than a reliable source. Even Galbraith merely says "Friedman himself conceded to the Financial Times in 2003: “The use of quantity of money as a target has not been a success. I’m not sure I would as of today push it as hard as I once did.”" which is a considerably weaker statement than saying "it was found to be highly destablizing". JRSpriggs (talk) 02:04, 17 March 2009 (UTC)

Too long to read

This article needs a serious trim. It's too long to read. I would encourage everyone to be BOLD and take an axe to the redundant parts of the article. Some parts can also be split of into daughter articles. Some specific observations:

1. There shouldn't be an 'Overview' section as the lead is supposed to function as an overview.
2. The lead as it stands doesn't actually summarize the whole article.
3. The 'History' section is too long.
4. The section 'Trends in central banking' seems to be entirely WP:OR.

--LK (talk) 12:28, 19 April 2009 (UTC)

It seems good to me, and would be a shame to just trim for the sake of it. Monetary policy is a big subject. Things shouldn't be axed at all; but you're right about general style, and the history section could certainly have its own main article. Wikidea 14:33, 9 August 2009 (UTC)

I find myself in agreement with LK, the article is too long to fit the standards of an encyclopedia (one of the encyclopedia's purposes being its focus on the essential). Many of the article's sections - Theory, History, etc. - could be summarized and outsourced into articles of their own such as "History of monetary policy" or "Monetary policy theory" (redundancy with monetary theory?). --Arbraxan (talk) 16:50, 18 August 2013 (UTC)

Fed funds rate

the fed funds rate is a market based rate it is not set by the fed.--Jgard5000 (talk) 20:33, 30 September 2009 (UTC)jgard5000

Yes, the actual Federal funds rate is set by voluntary agreements between the lending and borrowing banks. However, the Open Market Committee of Federal Reserve System (FOMC) establishes a target for the Federal funds rate. Bond traders working for the Fed buy or sell Treasury securities to bring the actual Federal funds rate close to the target. This control is quite effective. JRSpriggs (talk) 07:20, 1 October 2009 (UTC)

Don't vandalise!

Someone has been vandalising this site. Please stop it. —Preceding unsigned comment added by 121.44.156.2 (talk) 00:04, 7 October 2009 (UTC)

Effects of Monetary Policy

The article describes monetary policy at some length and it is quite obviously a complex subject. But where can I find some information on the effects of monetary policy? For example, around the beginning of this year (2009), the Fed introduced a step change in the money supply that doubled the U.S M0 or Monetary Base thereby devaluing the Dollar. What is the expected effect of this action? Does anyone know? Do theories exist that economic analysts would use to divine the results of a given action or is it more of a by-guess-and-by-gosh kind of thing?

The article is written in terms of interest rates but changes in the money supply produce other effects. In the free market, Dollars are a commodity like wheat or gold and are subject to laws of supply and demand. The Dollar is worth so much less today than, say, fifty years ago because the market is glutted with them. Increasing the M0 is going to drive down the value of the Dollar. For those buying U.S. goods, this is a windfall because they can get more for their Pounds or Yen or whatever. Going the other way, however, it raises the price of foreign goods and is, in effect, a tariff, i.e., protectionist. Is this correct?

It would seem that changes in monetary policy would produce predictable effects. If not here then where should the reader look? --Virgil H. Soule (talk) 18:23, 24 October 2009 (UTC)

Different schools of economics (see Category:Schools of economic thought and methodology) predict different effects from the same actions. Unfortunately, it is impossible to do controlled scientific experiments on monetary or fiscal policies, because one could never replicate all the circumstances which might affect the outcome and the cost of such an experiment would be prohibitive in any case. So one is left trying to: (1) make untestable inferences from theories about human behavior; (2) trying to correlate time series of economic variables and jumping to conclusions about what it means; or (3) generalizing from experiments with a few people over a short period of time and without much motivation to economies with hundreds of millions of people over decades motivated by life-or-death consequences. Take your pick. JRSpriggs (talk) 18:16, 25 October 2009 (UTC)

It is common to do what are known as 'Difference in differences' studies on 'natural experiments'. That is, we look at a policy change (the 'treatment') that occurs because of some outside factor (e.g. the central bank governor of a country has a heart attack, and is replaced with someone who holds very different views), and then we compare what happens in the country affected by the change with countries that are similar (the control group). Results obtained this way are almost exactly equivalent to experimental studies; difference in differences studies have been a real success story in economic analysis over the last couple of decades, confirming many things that were previously only suspected, and overturning many long held beliefs that turned out to be wrong. LK (talk) 11:28, 26 October 2009 (UTC)

To Lawrencekhoo: Thanks for that information. Could you provide a link to somewhere that one could start to look at these "difference in difference" studies? An educational site or journal or whatever. JRSpriggs (talk) 04:35, 28 October 2009 (UTC)

Sorry for delay in replying, I just noticed the query. This paper (although a bit dated) is a good introduction to the literature. This note from the NBER provides a good description of the methodology of Difference-in-Differences (DiD). It evolved from the analysis of natural experiment that were first suggested in the 1970's in response to worries about endogeneity in the models, and the inability of establishing causal relationships. There are many research papers using the DiD methods. Just do a google scholar search on "natural experiment" or "difference in differences". Regards LK (talk) 10:29, 6 November 2009 (UTC)

want you do to be a good student is that you also ways read you books and be a good student —Preceding unsigned comment added by 83.229.48.148 (talk) 11:32, 6 February 2010 (UTC)

Quantitative Easing

Related to this article, I flagged Quantitative easing as a WP:COATRACK for its advocacy of opposition to quantitative easing on the basis that this monetary policy creates money out of nothing. Please comment on Talk:Quantitative easing patsw (talk) 15:04, 29 March 2010 (UTC)

Is deflation bad or good?

I made a small change to a new paragraph at the end of Monetary policy#Gold standard. The change had three parts: (1) I added the word "supposed" to a description of deflation as a major disadvantage of the gold standard; (2) I linked the word "deflation" to our article on that subject; and (3) I added "If unexpected," at the beginning of a sentence describing the alleged harm caused by deflation due to increasing the burden of debt. Lawrencekhoo (talk · contribs) reverted my edit, saying "This is standard economic theory.".

Standard theory or not, the fact is that deflation is good, not bad. I was merely trying to change the article to avoid implying a falsehood. The harm described by the paragraph is due not to deflation per se, but to an unexpected change from one economic policy (inflation) to another (deflation). If mild deflation persisted for an extended period so that people understood it and expected it, then the level of debt would be very low and not more burdensome than anticipated when people entered into it (unless they miscalculated, as they could just as easily under the current inflationary policy). JRSpriggs (talk) 00:11, 17 April 2010 (UTC)

History of Monetary Policy

"Research by Cass Business School has also suggested that perhaps it is the central bank policies of expansionary and contractionary policies that are causing the economic cycle; evidence can be found by looking at the lack of cycles in economies before central banking policies existed."

This seems like language designed to support a theory regarding the immorality of central banks. I take issue with the historical claim - historians of the Late Middle Ages agree that the late middle ages was a time of protracted recession. The statement that there was a "lack of cycles" in economics before central banks is ridiculous; war, famine, disease and coinage debasement, trade imbalances - just for examples - came and went in cycles. However, I am a history major not an econ major so it;s possible I am missing some nuances. At the very least this should be cited.

Sarah PB (talk) 05:34, 19 April 2010 (UTC)

I've removed it as uncited POV OR. LK (talk) 07:54, 19 April 2010 (UTC)

Confusion

...I am trying to understand why the dollar loses value. In my accord the dollar is worth 100 pennies, and half is worth .50 cents. When a neighbor reconditions a lawnmower and sells it for more and has that price at a same balanced rate for the next year this is a good thing. Although the next year without knowing anything of the rise and cost of supply and demand that same person decides to up the sales price. This is now a consideration of inflation. Two streets over another neighbor realizes that inflation had been sneaking around the corner. he also is justified that the lawnmower salesman really did not know as much as he did. Unfortunately he fixed his own. That in a sense is a form of deflation. Saving money will always cause a sort of deflation. But when we spend and without realizing how much we spend, people who have more money will tend to do this, will allow others to notice. This notice is called demand. This now allows some to up there price. That is inflation. Money was used but theoretically it was not. Inflation is only determined when the evaluation of two countries has been evaluated. This evaluation is the effort of gathering all the price index categories and determining an average weight and balance of the cost in which "Had been" conducted. At this point and time money was being used but not in the actually calculation. Money will always be used. When the Federal Reserves Bank puts money into the economy it does it for a couple of reasons. One of them is that there is a shortage of funds in circulation. Any guess why. Probably a rise in the population. When this happens economists get the foot hold on this information and eventually after a sort of decline to a decline in value, in other words a balance these economist will level out the score as well. They will adjust to the rising "needs" of statistics and up the cost. This will more then happen when the lower level gets the information. This way competition has meaning although the first set price value will show up. So why are not we informed of the money collaboration. Why is it that the dollar will somehow loose value. Question now is what is the value of the dollar. If anyone can answer that all the power to you. And with that power share it as well. I know I'm waiting. This can be deleted by me at another time upon request. But please do the figuring here. What is inflation. It can't be the printing of money because not everyone knows how much that is. When you find out let us know. This way we can expect what we may get in money. If you were the most interesting person in the neighborhood and knew of it's growing capabilities you would start to build another taxi cab. That is inside information. That is also a form of inflation and a type of monetary system. When the neighborhood goes to the lofty wilderness, you will move with the move to find again a rise in demand and a rise in supply. Oops that was a rise in supply and a rise in demand. Remember no money as of yet has been exchanged. The proof lies in what you believe I know I read the original Article on Monetary Policy.David George DeLancey (talk) 20:12, 9 March 2011 (UTC)

I am sorry, but your comment is so poorly written that I cannot make sense of it even after fixing your spelling. Please try harder to be clear. And make your comment shorter, if possible. Thank you. JRSpriggs (talk) 04:13, 10 March 2011 (UTC)

Incongruity in Money Aggregates Section

In the section "3.3 Money Aggregates", the article says that the money aggregates approach is sometimes also called monetarism and that Alan Greenspan discontinued it when he became Fed chairman. However, the introduction to the "Monetarism" article states that Alan Greenspan was a supporter of monetarism. Something is amiss here.

Bookish899 (talk) 04:53, 29 April 2011 (UTC)

Alan Greenspan's position on monetary policy (among other issues) has changed over time. I believe that his support for monetarism was in an earlier period than his opposition (while Fed chairman). Perhaps it has changed back now that he is no longer beholden to the government.

Remember that the crash of 1987 occurred very soon after his appointment as chairman. Prior to that he was tightening monetary policy (perhaps to conform to monetarism). The crash made it necessary for him to expand the money supply enormously to prevent mass bankruptcies. This may have been the impetus for his change in position, but I am just guessing. JRSpriggs (talk) 08:57, 29 April 2011 (UTC)

Merged Expansionary monetary policy and Contractionary monetary policy into this article

These articles were tagged with a tag dating back to January 2010. The content wasn't much different, other than a basic definition. The definitions were merged into this article, and both now redirect to here. WTF? (talk) 16:19, 2 June 2013 (UTC)

Control of the supply of money

Jaromir Benes and Michael Kumhof of the IMF Research Department, and Nobel Prize winning economists Finn E. Kydland and Edward C. Prescott, claim that central bank reserves lag, rather than lead, the money creation (/lending) cycle.

http://en.wikipedia.org/wiki/Money_multiplier#Alternative_perspectives

If this is true, then monetary authorities of countries do not control the supply of money. All they can do is try to influence it by adjusting interest rates, to either encourage or discourage banks to borrow reserves from the central bank. Ultimately, the amount of reserves that commercial banks borrow is up to them, therefore commercial banks are ultimately in control of the money supply.

I was unable to access or find any information to the contrary, in either of the first two cited sources.