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Questions tagged [monetary-policy]

Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency. Further goals of a monetary policy are usually to contribute to economic growth and stability, to low unemployment, and to predictable exchange rates with other currencies.

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Greece default and why are US States not seen defaulting?

Reading various articles, it is clear that Greece is in the situation simply due to the fact that they have indulged in overspending on their national budget for over a decade, and with the 2008 ...
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Currency substitution after withdrawal from a currency union?

Currency substitution is the situation where a country uses a foreign currency. For example, Montenegro and Kosovo unilaterally use the euro, El Salvador and Panama unilaterally use the dollar. In ...
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Can banks maintain Euro accounts if the country they're in leaves the eurozone?

If a country forcibly leaves the Eurozone, is it possible for banks within this country to maintain existing euro deposits? Or does leaving the eurozone mean those deposits are automatically ...
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Any serious macro models for Greece's possible default or eurozone exit?

Since each news outlet says something about Greece these days, I wonder what serious economic research backs decisions made over the last seven years? The IMF papers on austerity, both early ones and ...
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Why should Greece destroy their cash euros?

Leading economists in my country (Sweden) recommend and predict that (in the case of default) the Greek government will destroy all the euro bills in the country. Making holes in them and stamp them ...
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Fractional reserve banking and the value of someone else's currency

Suppose there are two countries: $A$ and $B$. $A$ is a large, stable, democratic country with its own currency, the dollar. $B$ does not have its own currency. All prices and financial transactions in ...
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Who regulates the balancing of the books for commercial banks and how is this done? Is it public information?

I've just read Money Creation in the Modern Economy, an article published by the Bank of England. This article brings about a lot of questions in my mind. This article talks about money being created ...
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321 views

How is monetary policy fair in the current economy? [closed]

I've just read Money Creation in the Modern Economy, an article published by the Bank of England. This article brings about a lot of questions in my mind. This article talks about money being created ...
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1answer
306 views

How is monetary policy sustainable, or even fair, in the current economy? [closed]

I've just read Money Creation in the Modern Economy, an article published by the Bank of England. I'm trying to wrap my head around this from multiple points of view, since it brings about a lot of ...
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Secular Stagnation: A Plain-English Explanation

Put aside the mathematics and jargon for a couple minutes. If you had to explain the concept of secular stagnation to an (intelligent) person with no economics background, how would you go about doing ...
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Is zero inflation desirable?

Is zero inflation really desirable? To be more precise: Does inflation in real life have benefits that in some situations outweigh its social cost? E.g.: it works as a disincentive against holding ...
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Should Finland leave the eurozone?

Finland's economic recovery from the shock of the global financial crisis of 2007–2008 has been very weak. The country has been in recession for the past three years, with GDP expected to expand by ...
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Quantitative Easing in Africa

I am currently doing a research work on quantitative easing and can't find any example of it occurring in Africa. Have any African central banks ever used QE?
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What are the main differences in a macroeconomic model, i.e. New-Keynesian DSGE, under a currency substitution (full dollarization) scheme?

I have searched arround the web and economic journals trying to find out research related to a macroeconomic model in which the country is fully dollarized, but I haven't had any luck. My main concern ...
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Is monetary expansion the same as quantitative easing

Is monetary expansion policy the same as quantitative easing (i.e the buying of US treasuries by Federal reserve which injects more USD into the economy)?
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What's quantitative easing?

From what I understand after reading mainstream media, quantitative easing increases the supply of money in the economy without direct government spending (fiscal policy). It seems to have all the ...
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How can banks pay interest to the central bank?

If the central bank is the only institution that can increase the monetary base (create both, digital and paper money), how can any institution that borrows from it (mostly banks) satisfy its interest ...
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If all Banks in the world are emptied..?

What would happen if every person in the world pulled their money out of their bank accounts?
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What if only the government could create money? [duplicate]

If I understand correctly, under the dominant system of fractional reserve banking, many (all?) private banks can create money by lending. See, for example, Implications of abolishing Fractional ...
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What assurances are there that the Federal Reserve does not give money to banks?

My understanding of the operation of the United States Federal Reserve Bank is that it invents dollars by a unilateral, unbalanced credit to its own account and then it loans this money to member ...
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Abenomics and the Japanese VAT tax hike

Abenomics seems to me like a straightforward and modern plan of economic reflation through monetary easing and some attempt at structural reform. While it's still early, it looks like many of the ...
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Consequences to lending and value of national currency from a negative interest rate and 140-year mortgages in Sweden

According to an article at Yahoo Finance, the Swedish central bank dropped its zero interest rate to -0.1 percent a couple of days ago (the article is dated to Thursday, February 12th, 2015). Now, ...
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Australian Dollar Devaluation

I am a layman in economics. I am curious about the current devaluation of Australian Dollar in comparison with the US Dollar. Could someone please explain, in simplest words possible: What causes ...
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What is the difference betwene a partial default and having debts partially written off?

From The Daily Telegraph: The new Syriza-led government has demanded some form debt write-off on the country's €317bn liabilities, two-thirds of which are owned to official creditors in the form of ...
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What impact did monetary policy actions taken during the Great Recession (2007-09) have on U.S. economic performance?

What impact did monetary policy actions taken during the Great Recession (2007-09) have on U.S. economic performance? Quantitative easing and unconventional policy actions such as asset purchases and ...
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What major monetary policy actions were taken during the Great Recession (2007-2009)?

What major monetary policy actions were taken during the Great Recession (2007-2009)? Quantitative easing and unconventional policy actions such as asset purchases and "forward guidance". I think I'm ...
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Unlimited supply of national currency?

I was reading this article about Denmark central bank defending its currency peg: http://www.bloomberg.com/news/2015-01-22/denmark-cuts-key-deposit-rate-to-minus-0-35-to-drive-down-krone.html In it ...
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Impact of Fiscal and Monetary Policy during Great Recession on U.S. Economic Performance

What major fiscal and monetary policy actions were taken during the Great Recession (2007-2009)? What impact did they have on U.S. economic performance? I understand how how the recession occurred in ...
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Research on the link of QE and increased economic activity

Im looking for good literature of quantitative easing and the effects on economic actitivty. from a modelling perspective Any empirical research? What I am thinking of, is how much of an effect ...
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How can austerity and quantitative easing happen simultaniously?

As far as I can make out, in 2010 the UK government simultaneously started an austerity program which cut public spending, taking money out of the economy, while also enacting a quantitative easing ...
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Is Dollarization a good decision for a small open economy with an economic cycle that weakly correlates with the anchor country?

I have been reading the work of Alesina http://scholar.harvard.edu/files/alesina/files/dollarization.pdf, about the pros and cons of dollarization (i.e. adopting the currency of other country, say the ...
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Europe Quantitative Easing

Okay, this is from latest events. Countries like USA & Japan have successfully used QE to stimulate the economy, but what stops European Central Bank from implementing it? If they decide to use ...
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What would happen to the economy if the Fed's discount window completely stopped?

I'm curious what would happen the the US economy (and perhaps others) if the overnight lending capability of the Fed ceased operation for some reason (perhaps a cyber attack) for a non-trivial period ...
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Liquidity trap and consumers' reaction to an increase in money supply

I've understood that when the nominal interest rate reaches the zero lower bound there is nothing that the monetary policy can do to increase the output level of a certain economy. Because $i=0$, no ...
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How/why does foreign investment get scared by the monetary policy?

In an interview with Daron Acemoglu, he says "the hot money which was floating through Turkey has stopped after FED's declaration that we are going to give much more attention on monetary policy". ...
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What is the advantage and disadvantage to have a high value of USD for USA?

What is the advantage and disadvantage to have a high value of USD for USA? China and Japan always want to keep their currency low as oppose to USA.
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Models for inflation prediction

I am looking for some statistical models that are accepted to best predict inflation rates. Anything that is more complicated than linear model will be appreciated. Or even recommend books that ...
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How might the Swiss currency floor be unwound?

The Swiss National Bank has been enforcing a currency floor since 2011, not allowing the EUR/CHF rate to drop below 1.20 by buying unlimited amounts of foreign currency as needed with newly created ...
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Central Banks and Price Stability

Are there any empirical studies on the question of whether independent central banks cause price stability? I am seeking to understand if independence (of the central monitory authority) is part of ...
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Implications of abolishing Fractional Reserve Banking on mortgages and interest rates

Suppose for a moment that someone with legislative power decides to abolish Fractional Reserve Banking and passes a law that forces banks to only lend the money they own, that is M0. What would be the ...
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Inflation reasons beyond Friedman

I think everyone know this Friedman's quote nowadays: Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the ...
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Federal Reserve vs National Bank [closed]

The US had a national bank during the first few decades after its birth before it was abolished. Today, we have the Federal Reserve. What are the differences between the Federal Reserve and a ...
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Friedman k% applied to cryptocurrency

Follow on to this question: Would a cryptocurrency with a base that expanded at a fix rate face fewer difficulties than one with a stagnant base? Edit: I'm referring specifically to the issues ...
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From an economics perspective, what are the ramifications of a currency with fixed money supply?

I'm thinking specifically of bitcoins. What are the pros and cons of having a fixed number of coins, as opposed to more "normal" currencies? Would the currency have no inflation?
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How does a national budget differ from a household budget?

We are often told by pundits that "Country X cannot spend more than they take in in revenue, because a house that makes A and spends B will always collapse if B>A". Essentially the siren calls of a ...