Monetary policy is not a panacea.
The observation that money changes induce output changes in the same direction receives confirmation in some data sets but is hard to see in others. Large-scale reductions in money growth can be associated with large-scale depressions or, if carried out in the form of a credible reform, with no depression at all.
We have fluctuations all the time, business cycles, and they come about in various ways, but normally what sets them off is some reduction in the willingness of our population, our businesses, and foreigners to buy.
The monetary policy committee could either keep rates constant, increase them, or bring them down. There are three options possible compared to when it is accommodative.
The Federal Reserve's job is to take away the punch bowl just when the party gets going.
If I am confirmed, I am confident that my colleagues on the Federal Open Market Committee and I will maintain the focus on long-term price stability as monetary policy's greatest contribution to general economic prosperity and maximum employment.
Monetary policy causes booms and busts.
Keynes's contribution was not just to advocate spending government money in the middle of a recession. Every government had done that going back to the days of the Irish potato famine. What he gave to us was a way of thinking about the magnitude and the dimensions and so forth.
I think the Fed is not designed to have effective tools to deal with the economy. It should settle for just controlling the money supply. And - if it insists, it can worry about inflation.
At the federal level, the fiscal stimulus of 2008 and 2009 supported economic output, but the effects of that stimulus faded; by 2011, federal fiscal policy actions became a drag on output growth when the recovery was still weak.
I have never believed that central banks should have rigid inflation targeting. That is not a good thing to stabilize. There is nothing in economic theory to back this.
In all modesty, we must admit that governments are not always the best doctors when it comes to diagnosing economic ailments and prescribing the right treatment.
There are limits to monetary policy.
The Federal Open Market Committee (FOMC) is committed to policies that promote maximum employment and price stability, consistent with our mandate from Congress.
Stronger productivity growth would tend to raise the average level of interest rates and, therefore, would provide the Federal Reserve with greater scope to ease monetary policy in the event of a recession.
The two important variables for the policy formulation are projected inflation and the output gap. There is no clear hidebound mathematics that we must give 'X' weight to inflation and 'Y' weight to growth and form the associated policy.
Monetary policy should remain data dependent, be well communicated, and ensure that inflation expectations remain anchored.
The central focus of what we are doing at the Fed is to keep inflation from accelerating - and preferably decelerating.
Over the last decade, economists seemed to share a broad consensus about economic policy, with the old splits between monetarists and Keynesians apparently being settled by events. But the Great Recession of the last two years has changed everything.
Well, I think as long as people are talking about stimulus, I think the Fed will be thinking about cutting rates because monetary policy is the better way to go because you can turn it on and turn it off.
Business cycles lengthened greatly during the 20th century, as central banks learned to manage national economies by raising and lowering interest rates.
There is one policy for recession or depression and another for good times.
The Federal Reserve's monetary policy objective is to foster maximum employment and price stability. In this regard, a key challenge is to assess just how far the economy now stands from the attainment of its maximum employment goal.
Any organisation has to go through at least one depression to see how it survives, and a normal economic cycle takes seven years.
It is no longer a matter of serious controversy whether the government should play a positive role in helping to maintain a high level of economic activity. What we debate nowadays is not the need for controlling business cycles, but rather the nature of governmental action, its timing and its extent.
