Cato’s Annual Monetary Conference last November hosted a “shadow review” of the Federal Reserve’s own self-review, dedicated to examining “whether the U.S. monetary policy framework can be improved to meet future challenges.” The articles in the spring/summer 2020 issue of the Cato Journal, drawn from that conference, are now available online.
With inflation then consistent with the Fed’s 2 percent target and unemployment at remarkable lows, the Fed likely didn’t expect that the “future challenges” it planned to address would come so soon, or be so extreme. Today, thanks to the federal response to the Covid-19 pandemic shuttering businesses across the country, the Fed has once again reduced its policy rate almost to zero, while renewing its large-scale asset purchases and undertaking an unprecedented program of emergency lending that has all but erased the conventional boundary line separating monetary from fiscal policy. These developments make a reexamination of the Fed’s policy framework seem even more important than they were last fall.
In his Editor’s Note, Cato Vice President for Monetary Studies James A. Dorn writes that today, “central banks have… greater discretion and lending authority than ever before. Monetary policy has morphed into fiscal policy. The Fed is in uncharted waters and a review of policies aimed at the 2008 financial crisis is inadequate. A major assessment of central banking and alternative money regimes is overdue.” Several participants in last fall’s event have updated their articles to reflect these developments.
In the spirit of fostering dialogue and debate about what we can learn from past policy errors and how to apply those lessons going forward, the Cato Journal is proud to present the articles summarized below. (To access the full text of an article, click on its title.)
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