A Post-Keynesian View of Central Bank Independence, Policy Targets, and the Rules-versus-Discretion Debate

L. Randall Wray

Economics Working Paper Archive from Levy Economics Institute

Abstract: This paper addresses three issues surrounding monetary policy formation: policy independence, choice of operating targets, and rules versus discretion. According to the New Monetary Consensus, the central bank needs policy independence to build credibility; the operating target is the overnight interbank lending rate, and the ultimate goal is price stability. This paper provides an alternative view, arguing that an effective central bank cannot be independent as conventionally defined, where effectiveness is indicated by ability to hit an overnight nominal interest rate target. Discretionary policy is rejected, as are conventional views of the central bank's ability to achieve traditional goals such as robust growth, low inflation, and high employment. Thus, the paper returns to Keynes's call for low interest rates and euthanasia of the rentier.

Date: 2007-08
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (35)

Downloads: (external link)
http://www.levyinstitute.org/pubs/wp_510.pdf (application/pdf)

Related works:
Journal Article: A Post Keynesian view of central bank independence, policy targets, and the rules versus discretion debate (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:lev:wrkpap:wp_510

Access Statistics for this paper

More papers in Economics Working Paper Archive from Levy Economics Institute
Bibliographic data for series maintained by Elizabeth Dunn ( this e-mail address is bad, please contact ).