The Future of Monetary Policy: The Central Bank as an Army With Only a Signal Corps

Benjamin M. Friedman

No 7420, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The influence of monetary policy over interest rates, and via interest rates over nonfinancial economic activity, stems from the central bank's role as a monopolist over the supply of bank reserves. Several trends already visible in the financial markets of many countries today threaten to weaken or even undermine the relevance of that monopoly, and with it the efficacy of monetary policy. These developments include the erosion of the demand for bank-issued money, the proliferation of nonbank credit, and aspects of the operation of bank clearing mechanisms. What to make of these threats from a public policy perspective in particular, whether to undertake potentially aggressive regulatory measures in an effort to forestall them depends in large part on one's view of the contribution of monetary policy toward successful economic performance

JEL-codes: E52 E58 (search for similar items in EconPapers)
Date: 1999-11
New Economics Papers: this item is included in nep-mon
Note: EFG ME
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Citations: View citations in EconPapers (112)

Published as Benjamin M. Friedman, 1999. "The Future of Monetary Policy: The Central Bank as an Army with Only a Signal Corps?," International Finance, vol 2(3), pages 321-338.

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