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Monetary policy is the outcome of a complex interaction between monetary institutions, central banker preferences and policy rules, and hence human decision-making plays an important role. [88] It is more and more recognized that the standard rational approach does not provide an optimal foundation for monetary policy actions.
The European central bank, as the monetary union's central bank, responded to the sovereign debt crisis with a series of conventional and unconventional measures, including a decrease in the key policy interest rate, and three-year long-term refinancing operation (LTRO) liquidity injections in December 2011 and February 2012, and the ...
However, some economists—such as market monetarists—believe that unconventional monetary policy such as quantitative easing can be effective at the zero lower bound. [2] Others argue that when monetary policy is already used to the maximal extent, governments must be willing to use fiscal policy to create jobs.
During this era, the Fed also unveiled an experimental, unconventional monetary policy tool: quantitative easing, or large scale asset purchases (LSAPs) as they’re formally known.
The Fed’s balance sheet is important for monetary policy because officials use it to influence the longer-term interest rates that its key benchmark interest rate — the federal funds rate ...
In conventional central banking, the discount rate is set above the policy rate, as a disincentive to banks who are in need of short-term liquidity. Under a policy of dual interest rates, however, central banks determine the quantity of credit they will make available to the banking system at an interest rate which is sufficiently attractive to ...
Market monetarists have argued that unconventional methods of making monetary policy can succeed. The Economist describes the market monetarist approach as potentially including "'heroic' purchases of assets, on a bigger scale than anything yet tried by the Fed or the Bank of England." However, it notes that "Even then, people might refuse to ...
BEIJING (Reuters) -China will adopt an "appropriately loose" monetary policy next year, the first easing of its stance in some 14 years, alongside a more proactive fiscal policy to spur economic ...