The Translation of Monetary Policies into Monetary Conditions In this issue of Monetary Mechanics, I discuss in detail the differences between the Federal Reserve’s intended monetary policy stance and actual monetary conditions in the real and financial economy. Although many people believe that the Federal Reserve’s monetary policies are automatically and perfectly transmitted through the real and financial economy, working as they are originally designed to do, I believe that that is not the case. In previous issues of
Interesting piece. I would venture that policy changes since the GFC have likely tightened the link between policy and conditions. But this may unravel. Also if ‘Liquidity’ is in some sense a measure of the b/s capacity of financial intermediaries, it may be worth considering what drives each side of the financial sector b/s and whether assets or liabilities are exogenous or endogenous factors…. or both?
Interesting piece. I would venture that policy changes since the GFC have likely tightened the link between policy and conditions. But this may unravel. Also if ‘Liquidity’ is in some sense a measure of the b/s capacity of financial intermediaries, it may be worth considering what drives each side of the financial sector b/s and whether assets or liabilities are exogenous or endogenous factors…. or both?