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Fiddling with the Fed

Posted on June 09, 2008

Monetary policy is sometimes said to be pushing on a string if one wants to emphasize the ineffectiveness of expansionary monetary policy. However, I think that this expression is misleading - in the long run, monetary policy is quite powerful. In the long run, monetary policy is therefore rather pulling on that string. And because the economy is a complex system, there is more than one string involved. In fact, one can compare setting monetary policy with playing a violin - both involves pushing, pulling and plucking strings in order to create a harmonic tune.The strings of the Fed s ...

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economy , fed , inflation , the fed