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Monetary Policy Medicine: Large Effects From Small Doses?
Sunday, April 9, 2017 4:33
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from the San Francisco Fed
– this post authored by Oscar Jorda, Moritz Schularick, and Alan M. Taylor
If inflation increases rapidly, how do we know that higher interest rates will bring prices under control? And how do we know how much of the monetary “medicine” to administer? Economics relies primarily on observational data to answer such questions, while medical research uses randomized controlled trials to evaluate treatments. Applying that method to economics, the long history of international finance turns out to be an excellent laboratory to conduct monetary experiments. These experiments suggest that interest rates have sizable effects on the economy.
Source: http://econintersect.com/pages/contributors/contributor.php?post=201704090610
