The necessity for a strategic approach to monetary policy

Mickey D. Levy ()
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Mickey D. Levy: Berenberg Capital Markets, LLC

Business Economics, 2017, vol. 52, issue 2, No 5, 114-117

Abstract: Abstract The Fed has a spotty track record, and its discretionary approach to conducting monetary policy will lead to the same mistakes it made in the past. I emphasize the importance of adopting a strategic framework for conducting monetary policy. The Fed has constantly changed the course of monetary policy in response to high-frequency data and other temporary factors. The Fed’s excessive monetary ease has distorted economic and financial behavior. The Fed should base its policy on longer-run objectives rather than short-run economic and financial fluctuations, and communicate these objectives to the public and to financial markets. Under the Financial Choice Act, the Fed would have to establish a strategic guideline, and explain to Congress why monetary policy may be deviating from the guideline. I respect the Fed and see the need for change to maintain its credibility. The Fed must acknowledge its shortfalls and modify its focus.

Keywords: Fed; Monetary policy; Financial markets; Mandate; Economic (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1057/s11369-017-0037-1

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