Monetary misconceptions

Buiter, Willem H. (2000) Monetary misconceptions. CEPDP (469). London School of Economics and Political Science. Centre for Economic Performance, London, UK. ISBN 0753014084

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Abstract

The paper identifies a number of misconceptions about the monetary policy process and the monetary transmission mechanism in the UK. Among the misconceptions about the process are the alleged lack of regional and sectoral representativeness of the Monetary Policy Committee and the view that operational central bank independence means that monetary and fiscal policy are not properly coordinated. Among the transmission mechanism misconceptions, the "New Paradigm" figures prominently. Among the New Paradigm changes in the British economy that have been given prominence are the following: increasing openness; lower global inflation; lower profit margins, reflecting stronger competitive pressures; buoyant stock markets; a lower natural rate of unemployment; and a higher trend rate of growth of productivity. I argue that the New Paradigm has been over-hyped and misunderstood as regards its implications for monetary policy. Other misconceptions include the ''death of inflation'', the ''end of boom and bust'', a couple of Neanderthal Keynesian fallacies and the monetary fine tuning fallacy.

Item Type:	Monograph (Discussion Paper)
Official URL:	http://cep.lse.ac.uk
Additional Information:	© 2000 W. H. Buiter
Divisions:	European Institute Centre for Economic Performance
Subjects:	H Social Sciences > HG Finance
Date Deposited:	30 Jul 2008 13:06
Last Modified:	13 Sep 2024 19:42
URI:	http://eprints.lse.ac.uk/id/eprint/20168

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