Monetary Policy

Stefano Ugolini

Chapter 5 in The Evolution of Central Banking: Theory and History, 2017, pp 207-262 from Palgrave Macmillan

Abstract: Abstract As long as monetary policy is conceptualized as a sort of distortionary tax policy, the maintenance of price stability can be said to be always optimal. However, the price level depends on money creation not only by the public sector, but also by the private sector. Because financial frictions can make private money creation suboptimal, the monetary stance should be determined according not only to fiscal criteria, but also to regulatory criteria. Historically, although money creation has often been used as a fiscal tool in times of emergency, monetary policy does not seem to have been generally deployed as a seigniorage-maximizing strategy. Emphasis on external monetary stability has always been strong in Europe, while the United States have traditionally been focused on internal monetary stability.

Date: 2017
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DOI: 10.1057/978-1-137-48525-0_5

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