IDEAS home Printed from https://ideas.repec.org/a/elg/ejeepi/v15y2018i1p32-46.html
   My bibliography  Save this article

Monetary policy and the punch bowl: the case for quantitative policy and wage growth targeting

Author

Listed:
  • Thomas I. Palley

    (Independent Economist, Washington, DC, USA)

Abstract

Federal Reserve Chairman William McChesney Martin famously declared that the Federal Reserve ‘is in the position of the chaperone who has ordered the punch bowl removed just when the party was really warming up.’ This paper uses the punch bowl metaphor to analyse how the Federal Reserve can improve monetary policy so as to deliver shared prosperity with greater financial stability. The problem is the party starts earlier on Wall Street than Main Street, so the Fed may remove the punch bowl before the party reaches Main Street. Ensuring Main Street attends the party requires a new recipe for the punch, new serving rules, and a new punch master. Additionally, there is a deeper problem that the current neoliberal growth model has the economy addicted to monetary punch. Resolving that requires a cure that goes beyond the punch bowl.

Suggested Citation

  • Thomas I. Palley, 2018. "Monetary policy and the punch bowl: the case for quantitative policy and wage growth targeting," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 15(1), pages 32-46, April.
    • Handle: RePEc:elg:ejeepi:v:15:y:2018:i:1:p32-46
    as

    Download full text from publisher

    File URL: https://www.elgaronline.com/abstract/journals/ejeep/15-1/ejeep.2018.01.03.xml
    Download Restriction: Restricted access
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Paul R. Krugman, 1998. "It's Baaack: Japan's Slump and the Return of the Liquidity Trap," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 137-206.
    2. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
    3. William Ellery Channing, 1994. "Change," American Journal of Economics and Sociology, Wiley Blackwell, vol. 53(1), pages 15-15, January.
    4. Michalis Nikiforos & Duncan K. Foley, 2012. "Distribution And Capacity Utilization: Conceptual Issues And Empirical Evidence," Metroeconomica, Wiley Blackwell, vol. 63(1), pages 200-229, February.
    5. repec:bla:scandj:v:96:y:1994:i:1:p:111-16 is not listed on IDEAS
    6. Olivier Blanchard & Giovanni Dell'Ariccia & Paolo Mauro, 2010. "Rethinking Macroeconomic Policy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(s1), pages 199-215, September.
    7. Brunner, Karl & Meltzer, Allan H., 1976. "The Phillips curve," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 1-18, January.
    8. John Williamson, 1994. "Estimating Equilibrium Exchange Rates," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 17, January.
    9. Fischer, Stanley, 1990. "Rules versus discretion in monetary policy," Handbook of Monetary Economics, in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 2, chapter 21, pages 1155-1184, Elsevier.
    10. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
    11. Tobin, James, 1972. "Inflation and Unemployment," American Economic Review, American Economic Association, vol. 62(1), pages 1-18, March.
    12. Gauti B. Eggertsson & Paul Krugman, 2012. "Debt, Deleveraging, and the Liquidity Trap: A Fisher-Minsky-Koo Approach," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(3), pages 1469-1513.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Akhand Akhtar Hossain, 2009. "Central Banking and Monetary Policy in the Asia-Pacific," Books, Edward Elgar Publishing, number 12777.
    2. George-Marios Angeletos & Chen Lian, 2018. "Forward Guidance without Common Knowledge," American Economic Review, American Economic Association, vol. 108(9), pages 2477-2512, September.
    3. Wenzlaff, Ferdinand & Kimmich, Christian & Koudela, Thomas & Richters, Oliver & Freydorf, Christoph & Schuster, Ludwig, 2012. "Wachstumszwang in der Geldwirtschaft? Theoretische Erwägungen," EconStor Research Reports 237053, ZBW - Leibniz Information Centre for Economics.
    4. Dosi, Giovanni & Fagiolo, Giorgio & Napoletano, Mauro & Roventini, Andrea & Treibich, Tania, 2015. "Fiscal and monetary policies in complex evolving economies," Journal of Economic Dynamics and Control, Elsevier, vol. 52(C), pages 166-189.
    5. Proaño, Christian R. & Lojak, Benjamin, 2020. "Animal spirits, risk premia and monetary policy at the zero lower bound," Journal of Economic Behavior & Organization, Elsevier, vol. 171(C), pages 221-233.
    6. Thierry Warin, 2006. "A Note on Post-Modern Monetary Policy," Middlebury College Working Paper Series 0617, Middlebury College, Department of Economics.
    7. Binder, Carola Conces, 2016. "Estimation of historical inflation expectations," Explorations in Economic History, Elsevier, vol. 61(C), pages 1-31.
    8. Aleksandra Halka, 2015. "Lessons from the crisis.Did central banks do their homework?," NBP Working Papers 224, Narodowy Bank Polski.
    9. Roberto M. Billi, 2011. "Optimal Inflation for the US Economy," American Economic Journal: Macroeconomics, American Economic Association, vol. 3(3), pages 29-52, July.
    10. repec:spo:wpecon:info:hdl:2441/f6h8764enu2lskk9p6go0e900 is not listed on IDEAS
    11. Willem H. Buiter, 2003. "James Tobin: An Appreciation of his Contribution to Economics," Economic Journal, Royal Economic Society, vol. 113(491), pages 585-631, November.
    12. repec:hal:spmain:info:hdl:2441/f6h8764enu2lskk9p6go0e900 is not listed on IDEAS
    13. Edmund S. Phelps, 2008. "Macroeconomics for a Modern Economy," The American Economist, Sage Publications, vol. 52(1), pages 3-22, March.
    14. Belke, Ansgar & Klose, Jens, 2013. "Modifying Taylor reaction functions in the presence of the zero‐lower‐bound — Evidence for the ECB and the Fed," Economic Modelling, Elsevier, vol. 35(C), pages 515-527.
    15. Cecion, Martina & Coenen, Günter & Gerke, Rafael & Le Bihan, Hervé & Motto, Roberto & Aguilar, Pablo & Ajevskis, Viktors & Giesen, Sebastian & Albertazzi, Ugo & Gilbert, Niels & Al-Haschimi, Alexander, 2021. "The ECB’s price stability framework: past experience, and current and future challenges," Occasional Paper Series 269, European Central Bank.
    16. Peter N. Ireland, 2005. "The Monetary Transmission Mechanism," Boston College Working Papers in Economics 628, Boston College Department of Economics.
    17. Jochen O. Mierau & Mark Mink, 2018. "A Descriptive Model of Banking and Aggregate Demand," De Economist, Springer, vol. 166(2), pages 207-237, June.
    18. P Arestis & A Mihailov, 2009. "Flexible Rules cum Constrained Discretion: A New Consensus in Monetary Policy," Economic Issues Journal Articles, Economic Issues, vol. 14(2), pages 27-54, September.
    19. repec:hal:wpspec:info:hdl:2441/f6h8764enu2lskk9p6go0e900 is not listed on IDEAS
    20. Phuong Ngo & Francois Gourio, 2016. "Risk Premia at the ZLB: a macroeconomic interpretation," 2016 Meeting Papers 1585, Society for Economic Dynamics.
    21. Guido Ascari & Argia M. Sbordone, 2014. "The Macroeconomics of Trend Inflation," Journal of Economic Literature, American Economic Association, vol. 52(3), pages 679-739, September.
    22. Philip Arestis & Alexander Mihailov, 2011. "Classifying Monetary Economics: Fields And Methods From Past To Future," Journal of Economic Surveys, Wiley Blackwell, vol. 25(4), pages 769-800, September.
    23. Michaelis Nikiforos, 2018. "Distribution-led growth through methodological lenses," FMM Working Paper 24-2018, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.

    More about this item

    Keywords

    monetary policy; punch bowl; quantitative regulation; asset-based reserve requirements; policy rules; wage targeting;
    All these keywords.

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:elg:ejeepi:v:15:y:2018:i:1:p32-46. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Phillip Thompson (email available below). General contact details of provider: http://www.elgaronline.com/ejeep .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.