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11. A Dangerous Brew for Monetary Policy

Author:
Charles I. Plosser
Publication Date:
09-2011
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
It is a pleasure to join you at Cato's 28th Annual Monetary Conference. In preparing today's remarks, I noted that this year's topic of how monetary policy should deal with asset prices was also discussed here in 2008. The speakers at that time expressed a wide variety of views and opinions. The fact that this important question continues to resurface here and at other prominent meetings in recent years suggests that a consensus has yet to emerge.
Topic:
Monetary Policy

12. Limits of Monetary Policy in Theory and Practice

Author:
Vincent R. Reinhart and Carmen M. Reinhart
Publication Date:
09-2011
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The Federal Reserve's conduct of monetary policy casts a spell over market participants, commentators, and academics. The pages of financial newspapers parse subtle differences among the comments of Fed officials and delve deeply into potentially multiple meanings of official statements. Academic discussions argue that the path of the policy rate may (as in Taylor 2009) or may not (as in Bernanke 2010, and Greenspan 2010) have fueled a home-price bubble in the United States.
Topic:
Monetary Policy
Political Geography:
United States

13. Financial Crises: Prevention, Correction, and Monetary Policy

Author:
Manuel Sánchez
Publication Date:
09-2011
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The financial crisis that surfaced in 2007 has stressed the need to identify the ultimate sources of the incentives that were behind the preceding credit and housing bubbles. To lower the likelihood of future financial collapses, prudent economic policies as well as an adequate regulatory and supervisory framework for financial institutions are required. Monetary policy, in turn, should be directed toward price stability, which is a central bank's best contribution not only to long-term economic growth, but also to financial stability.
Topic:
Disaster Relief and Monetary Policy

14. Supply: A Tale of Two Bubbles

Author:
Mark A. Calabria
Publication Date:
09-2011
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
To the extent that monetary policy influences asset prices, it does so via the demand for assets, by changing the borrowing costs to purchase assets, or via supply, where movements in interest rates can make investment in assets look more or less attractive. Fiscal policy interventions can also contribute to bubbles by changing the cost of acquiring specific assets. Most discussions of asset bubbles, particularly those involving the role of monetary policy, focus on demandside factors. This article examines the role of supply-side factors in the recent booms in the U.S. housing market and dot-com stocks. The importance of supply constraints in each market is discussed. Policy implications are then presented.
Topic:
Monetary Policy
Political Geography:
United States

15. Preventing Bubbles: Regulation versus Monetary Policy

Author:
David Malpass
Publication Date:
09-2011
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Over the years, there has been a lot to consider in the Federal Reserve's choices of monetary policy and their relationship to bubbles. My conclusion is that mistaken U.S. monetary policy, usually related to the Fed's indifference to the value of the dollar, has repeatedly caused harmful asset bubbles in the United States and abroad. Policy is again at risk with the Fed's imposition of near-zero interest rates and its decision to conduct large-scale asset purchases (termed “quantitative easing”). Regulatory policy has often been ineffective at identifying or addressing asset bubbles, especially those caused by Fed policy. The solution is a parallel track to improve monetary policy so that it provides a more stable dollar and fewer asset bubbles; and to strengthen regulatory policy so that it provides a more reliable base for growth-creating free markets.
Topic:
Monetary Policy
Political Geography:
United States

16. Alternatives to the Fed?

Author:
Bennett T. McCallum
Publication Date:
09-2010
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
I must begin by saying that I have been extremely disappointed— the word “appalled” may be more accurate—by several developments over the last two years involving the Federal Reserve. It was, I believe, appropriate that the Fed would respond with expansionary monetary policy in the face of a major macroeconomic downturn, which it did. But it did not have to do so by means of operations that incorporated major excursions into credit policy, as well as monetary policy, and thereby into the unauthorized exercise of fiscal policy. By engaging in such operations on a very large scale, the Fed's actions are almost certain to have detrimental effects on the Fed's independence—and thereby on its resulting ability to focus attention on what should be its principal objective, namely, price level stability. Furthermore, the Fed has not been moving quickly—if at all—to explain and correct this situation.
Topic:
Monetary Policy

17. The Constitutionalization of Money

Author:
James M. Buchanan
Publication Date:
06-2010
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The market will not work effectively with monetary anarchy. Politicization is not an effective alternative. We must commence meaningful dialogue with acceptance of these elementary verities. Far too much has been said and written in elaboration of the first statement, which too often is taken to be equivalent to the assertion that "capitalism" or "the market" has failed. Admittedly claims for market efficacy without qualifiers can be found. But economists should know that anarchy can only generate disorder rather than its opposite.
Topic:
Markets and Monetary Policy
Political Geography:
United States

18. The World Economy: Bottoming Out or a Respite before the Next Crunch?

Author:
Eswar Prasad
Publication Date:
06-2010
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
In early 2009, the world economy seemed to be headed into an irreversible decline. But a strong dose of stimulative monetary and fiscal policies—perhaps with an assist from the natural resilience of the market economy—seem to have done the trick in stabilizing the financial system and setting the stage for global recovery. Flows of private capital to emerging markets have revived and world trade has begun to rise back to levels seen before the crisis hit. Consumer and business confidence are back on the rise.
Topic:
Markets and Monetary Policy

19. Plunder! How Public Employee Unions Are Raiding Treasuries, Controlling Our Lives, and Bankrupting the Nation

Author:
Chris Edwards
Publication Date:
06-2010
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
New data from the Bureau of Labor Statistics show that there are more union members in the public sector than in the private sector in the United States. Thirty-nine percent of state and local government workers are members of unions, compared to just 7 percent of private sector workers. What problems are caused by the high level of public sector unionism?
Topic:
Monetary Policy
Political Geography:
United States

20. The Swiss National Bank: 1907–2007 by Werner Abegg, Ernst Baltensperger, et al., contributors

Author:
Kurt Schuler
Publication Date:
09-2008
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The Swiss franc is the world's best-performing currency over the last century: it has lost only about 87 percent of its value in terms of gold, compared to 97 percent for the U.S. dollar and more than 99 percent for almost all other currencies. Switzerland's avoidance of wars, which is part policy and part lucky geography, has contributed to the relative stability of the franc. So have the conservative financial habits of its citizens, which have been reflected in the country's generally prudent government finances. But some credit undoubtedly belongs to the central bank, the Swiss National Bank. It has consistently pursued monetary policies that have produced low inflation, and has made few consequential errors since it was established in 1907. Its experience therefore should be of interest far beyond the borders of Switzerland. This centennial volume, by a constellation of 40 Swiss and foreign authors, is a history and an examination of issues in monetary policy the central bank has faced. It is typically Swiss in its occasionally ponderous thoroughness, pleasing design, and high quality.
Topic:
Economics, International Trade and Finance, and Monetary Policy
Political Geography:
France and Switzerland