Labor Monetary Policy and Illiquidity

Jan Toporowski ()
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Jan Toporowski: SOAS, University of London

No inetwp218, Working Papers Series from Institute for New Economic Thinking

Abstract: The discussion of financial stability, and the role of monetary policy, is incoherent because there is very little agreement on what constitutes financial stability (and, by implication, instability) - exchange rate stability, asset price stability, absence of debt default. By implication, there is a gap between the claims of various authors to the general applicability of their respective analyses, and the actual applicability of their conclusions, let alone the usefulness of some of their policy recommendations. The paper argues that the key issue is the regulation of the liquidity of all financial markets, and not just that of the banking system, through the markets for government securities. The paper examines the sources of this liquidity in the financial portfolios of the private sector, and how that liquidity may be managed through the open market operations of central banks and the debt management operations of governments. An implication of this approach is yield curve control and the use of (government) debt management to control the liquidity of the markets. These elements of monetary policy have been neglected in theory and policy since the 1950s.

Keywords: monetary policy; liquidity; debt management; yield curve control. (search for similar items in EconPapers)
JEL-codes: E50 G24 G29 H63 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2024-01-24
New Economics Papers: this item is included in nep-cba, nep-hme, nep-mon and nep-pke
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Persistent link: https://EconPapers.repec.org/RePEc:thk:wpaper:inetwp218

DOI: 10.36687/inetwp218

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