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- Title
WHAT YOU DON'T KNOW CAN HURT YOU: KNOWLEDGE PROBLEMS IN MONETARY POLICY.
- Authors
Salter, Alexander W.; Smith, Daniel J.
- Abstract
Many economists hold that monetary policy missteps played a role in causing or prolonging the 2007-2008 financial crisis. In light of the perceived failure of monetary orthodoxy, models are being theoretically refined and empirically recalibrated. Absent from these technical debates is a recognition of the immense knowledge burdens inherent in monetary policy. We argue that Fed authorities do not have the knowledge required to achieve their own monetary objectives, given their inability to approximately measure or predict changes in the demand for money. Finally, we evaluate the ability of free banking to overcome this knowledge problem. ( JEL E42, E52, E58, E61, P16)
- Subjects
THEORY of knowledge; ECONOMISTS; MONETARY policy; RELIGIOUS orthodoxy; BANKING industry
- Publication
Contemporary Economic Policy, 2017, Vol 35, Issue 3, p505
- ISSN
1074-3529
- Publication type
Article
- DOI
10.1111/coep.12219