Monetary policy is not the interest rate

It’s the rule, writes Christy Romer:

The regime shift we are seeing in Japan is just the kind of bold action that might actually succeed in changing both inflation and growth expectations a substantial amount. As a result, it may be an effective tool for encouraging robust recovery and an end to deflation.

Nick Rowe has been saying that for a while but, before we get too gung-ho, Romer cautions:

I don’t know if the Japanese experiment with monetary regime change will work. But I am confident that we will learn a great deal because they had the nerve to try.

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  1. […] eye to policy “well just don’t lift rates then, you frikken choose them” (even though you don’t) – this kind of monetary policy fine-tuning is ridiculous, make it […]

  2. […] in NZ compared to the rest of the world.  The RBNZ doesn’t set any of these things – monetary policy is the inflation target, and has no impact on medium-long term real rates or deficits.  Shouldn’t we try asking why […]

  3. […] in NZ compared to the rest of the world.  The RBNZ doesn’t set any of these things – monetary policy is the inflation target, and has no impact on medium-long term real rates or deficits.  Shouldn’t we try asking why […]

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