Abstract
This paper asks whether the suite of unorthodox monetary policies (including
quantitative easing, or QE) really make sense in the presence of a global
liquidity trap. It finds that QE-type policies are an expedient remedy for
short-term crisis management, but their ongoing and expanded use have
distorted global markets and will have significant dynamic efficiency costs
over the next decade. The alternative is for discretionary fiscal policy to play
a bigger role in stabilisation, with monetary policy left to accommodate. Both
policies should be operated by a single agency accountable to the electorate.
quantitative easing, or QE) really make sense in the presence of a global
liquidity trap. It finds that QE-type policies are an expedient remedy for
short-term crisis management, but their ongoing and expanded use have
distorted global markets and will have significant dynamic efficiency costs
over the next decade. The alternative is for discretionary fiscal policy to play
a bigger role in stabilisation, with monetary policy left to accommodate. Both
policies should be operated by a single agency accountable to the electorate.
| Original language | English |
|---|---|
| Pages (from-to) | 49-74 |
| Number of pages | 27 |
| Journal | Agenda |
| Volume | 28 |
| Issue number | 1 |
| Publication status | Published - 2021 |