Strategies for Monetary Policy

by John H. Cochrane (Editor), John B. Taylor (Editor)

Overview

As the Federal Reserve System conducts its latest review of the strategies, tools, and communication practices it deploys to pursue its dual-mandate goals of maximum employment and price stability, Strategies for Monetary Policy—drawn from the 2019 Monetary Policy Conference at the Hoover Institution—emerges as an especially timely volume. The book’s expert contributors examine key policy issues, offering their perspectives on US monetary policy tools and instruments and the interaction between Fed policies and financial markets. The contributors review central bank inflation-targeting policies, how various monetary strategies actually work in practice, and the use of nominal GDP targeting as a way to get the credit market to work well and fix the friction in that market. In addition, they discuss the effects of the various rules that the Fed considers in setting policy, how the Fed’s excessive fine-tuning of the economy and financial markets has added financial market volatility and harmed economic performance, and the key issues that impact achievement of the Fed’s 2 percent inflation objective. The volume concludes by exploring potential options for enhancing our policy approach.

Product Details

ISBN-13:	9780817923747
Publisher:	Hoover Institution Press
Publication date:	05/15/2020
Pages:	416
Sales rank:	1,088,331
Product dimensions:	5.50(w) x 8.50(h) x 1.40(d)

About the Author

John H. Cochrane is the Rose-Marie and Jack Anderson Senior Fellow at the Hoover Institution, a research associate of the National Bureau of Economic Research, and an adjunct scholar of the Cato Institute. Cochrane contributes editorial opinion essays to the Wall Street Journal and other publications and maintains the Grumpy Economist blog. John B. Taylor is the Mary and Robert Raymond Professor of Economics at Stanford University and the George P. Shultz Senior Fellow in Economics at the Hoover Institution. He served on the President’s Council of Economic Advisers, as undersecretary of the Treasury for international affairs, and on the G-20 Eminent Persons Group on Global Financial Governance.

Table of Contents

Preface John H. Cochrane John B. Taylor ix

1 Models, Markets, and Monetary Policy Richard H. Clarida 1

General Discussion John B. Taylor Michael D. Bordo Chris Crowe Charles J. Plosser Sebastian Edwards Brian Sack John H. Cochrane

2 The Case for Implementing Effective Negative Interest Rate Policy Andrew Lilley Kenneth Rogoff 27

Discussant Andrew Levin

General Discussion Michael D. Bordo Peter Fisher John H. Cochrane Mickey Levy George Selgin Charlie Calomiris

3 Tying Down the Anchor: Monetary Policy Rules and the Lower Bound on Interest Rates Thomas M. Mertens John C. Williams 103

Discussant Monika Piazzesi

Introductory Remarks Kevin Warsh

General Discussion Krishna Guha John H. Cochrane Volker Wieland Bob Wenzel George Selgin Thomas M. Mertens James Bullard

4 Perspectives on US Monetary Policy Tools and Instruments James D. Hamilton 173

Discussant Peter N. Ireland

General Discussion Adrian Auclert John B. Taylor Jeff Lacker John H. Cochrane Sebastian Edwards Andrew Levin Andy Filardo James Bullard

5 Evaluating Rules in the Fed's Report and Measuring Discretion John H. Cochrane John B. Taylor Volker Wieland 217

Discussant David Papell

Symposium: The Interaction of Markets and Policy 259

Introduction George P. Shultz 259

6 The Interaction of Markets and Policy: A Corporate Finance Perspective Laurie Simon Hodrick 263

7 The Fed and Financial Markets: Suggestions to Improve an Unhealthy Relationship Mickey D. Levy 269

8 Market Feedback Effects of Central Bank Operations under an Inflation-Targeting Regime Scott Minerd 289

General-Discussion George P. Shultz Peter Fisher John B. Taylor John H. Cochrane

Symposium: Monetary Strategies in Practice 309

Introduction Charles I. Plosser 309

9 Optimal Monetary Policy and Inequality James Bullard 311

10 Monetary Policies in Practice Mary C. Daly 323

11 Discussion of Key Issues Impacting Achievement of the Fed's 2% Inflation Objective Robert S. Kaplan 335

12 Improving Our Monetary Policy Strategy Loretta J. Master 345

General Discussion Charles I. Plosser Andrew Levin John H. Cochrane Michael D. Bordo Bill Nelson Brian Sack Andy Filardo

About the Contributors 367

About the Hoover Institution's Working Group on Economic Policy 377

Index 379

Editorial Reviews

"The cutting edge of debate among leading academics and policy makers on strength and limits of the current monetary policy framework is gathered in this volume. The various chapters bridge theory and central banking practice to offer innovative solutions. At the same time, the authors do not refrain from voicing some scepticism. This book is a must-read for central bankers, monetary economists, and people interested in understanding how monetary policy decisions have been taken and will be taken in the future." — Agustín Carstens, General Manager of the Bank of International Settlements, former Finance Minister of Mexico, and former Governor of the Bank of Mexico

"They underscore the fact that not all is settled in the world of monetary policy, and much fruitful work remains to be done." —David Wilcox, Business Economics 

From the Publisher