Monetary Policy and Economic Policy

Iordachioaia Adelina-Geanina
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Iordachioaia Adelina-Geanina: Titu Maiorescu University, Bucharest, Romania

Journal of Knowledge Management, Economics and Information Technology, 2011, vol. 1, issue 2, 4

Abstract: There is widespread agreement that monetary policy matters,but there is disagreement about how it should be conducted. Behind this disagreement lie differences in theoretical understandings. The paper contrasts the New Classical, Neo-Keynesian, and Post-Keynesian frameworks, there by surfacing the differences. The New Classical model has policy only affecting long run inflation. The Neo-Keynesian has policy impacting inflation, unemployment and real wages. The Post-Keynesian model also impacts growth, so policy implicitly picks a quadruple. Inflation targeting is a sub-optimal policy frame because it biases decisions toward low inflation by obscuring the fact that policy also affects unemployment, real wages, and growth.

Keywords: monetary policy; inflation targeting; New Classical; Neo-Keynesian; Post- Keynesian (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:spp:jkmeit:1113

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