Macroeconomics › Section O · Monetary policy and bank regulation › Topic O.6
Pitfalls and unconventional monetary policy
Monetary policy is powerful but clumsy. It works with long delays, can stall when banks will not lend or rates reach zero, and has pushed central banks into new tools such as quantitative easing. This topic covers the pitfalls and the unconventional answers.
In this topic
- Long and variable lags
- Pushing on a string
- Velocity and the quantity equation
- Worked example: when velocity moves
- The zero lower bound and deflation
- Quantitative easing and tightening
- Negative rates and emergency lending
- Worked example: rates and a mortgage
- The 2021 to 2023 inflation test
- Open debates
- Common mistakes to avoid
- Key takeaways
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