The Esoteric Science of Monetary Policy!

We are aware that monetary policy is a demand side policy that central banks use to manipulate interest rates and the money supply so as to influence AD and inflation.  It is important to realise that monetary policy is pro active due to the time lags experienced in the transmission mechanism and that the rule of ceteris paribus is often difficult to implement when considering the macro economy.  There are a couple of relatively new tools that monetary policy has begun to rely more on since the start of the GR  and it will be interesting to see how policies such as quantitative easing and forward guidance will transpire.  It is essential that you have a sound understanding of the relationship between R and the Dm as well as the Sm.  As always have your pens poised and happy reading.

one glove fits all?      chains of analysis paradise      what is forward guidance?                                                                      transmission mechanism and sterling

what is quantitative easing?     us asset purchases    do not trust qe      fourth paragraph     friend of foe?    history of the pound

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