Monetary policy and the punch bowl: the case for quantitative policy and wage growth targeting

Thomas Palley

European Journal of Economics and Economic Policies: Intervention, 2018, vol. 15, issue 1, 32-46

Abstract: Federal Reserve Chairman William McChesney Martin famously declared that the Federal Reserve ‘is in the position of the chaperone who has ordered the punch bowl removed just when the party was really warming up.’ This paper uses the punch bowl metaphor to analyse how the Federal Reserve can improve monetary policy so as to deliver shared prosperity with greater financial stability. The problem is the party starts earlier on Wall Street than Main Street, so the Fed may remove the punch bowl before the party reaches Main Street. Ensuring Main Street attends the party requires a new recipe for the punch, new serving rules, and a new punch master. Additionally, there is a deeper problem that the current neoliberal growth model has the economy addicted to monetary punch. Resolving that requires a cure that goes beyond the punch bowl.

Keywords: monetary policy; punch bowl; quantitative regulation; asset-based reserve requirements; policy rules; wage targeting (search for similar items in EconPapers)
JEL-codes: E50 E52 E58 (search for similar items in EconPapers)
Date: 2018
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Working Paper: Monetary policy and the punch bowl - The case for quantitative policy and wage growth targeting (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:elg:ejeepi:v:15:y:2018:i:1:p32-46

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