ECON 350 Review Essay ----Athanasios Orphanides' article " Is Monetary Policy

1400 WordsApr 23, 20196 Pages
ECON 350 Review Essay ----Athanasios Orphanides' article " Is Monetary Policy Overburdened ?" Summary Introduction: After the global financial crisis, the economies of many countries were stagnant, some companies closed down, many people lost their jobs, and governments needed to spend much money to help these companies and unemployed people which caused large government debts, the banks also faced to bankrupt. All of these problems caused the governments wish the monetary policy can provide the solutions to recover the economy. The primary goal of monetary policy is to keep price stability which is very important for central banks, it could help central banks make the monetary policy process is apolitical and get…show more content…
The structural and labor policies which can increase the labor markets' efficiency and flexibility. Central banks cannot create the jobs, make sustainable growth and increase the GDP, so government should apply other policies to solve the problem. The monetary policy was successful in the inflation targeting(IT) framework, which them main difference to the multiple-goal approach is that IT puts price stability at the first.. The IT practice can helped central bank to get well inflation expectation of their goal of price stability. So, the best way to the benefit of solving the public policy goal of full employment is to pay more attention on the monetary policy's primary goal of keeping price stability. The more focuses on employment and output would overburden monetary policy which is more harm to solve these problems. Fiscal sustainability: Fiscal sustainability is another public policy goal to overburden monetary policy. The gross and net debt/GDP ratios in the United States, the United Kingdom, the euro area and Japan show these four economies face the fiscal challenges. But there is larger problem which the governments have not yet change their spending and taxing. The political inconformity cause they are difficult to accept a sensible long run plan which can make the long run fiscal sustainability and short run growth at same time. So in this condition, many governments

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