Chapter

Globalization and Monetary Policy Missions Impossible

John B. Taylor

in International Dimensions of Monetary Policy

Published by University of Chicago Press

Published in print March 2010 | ISBN: 9780226278865
Published online February 2013 | e-ISBN: 9780226278872 | DOI: http://dx.doi.org/10.7208/chicago/9780226278872.003.0013
Globalization and Monetary Policy Missions Impossible

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This chapter examines three missions impossible in the globalization field and monetary policy. These missions impossible include the first—M:i:I that began thirty years ago, the second—M:i:II that began ten years ago, and the third—M:i:III that is taking place today. For the first mission impossible, according to the estimated models the effects were very small quantitatively, and as a practical matter the policy recommendations can ignore these international effects. From the second mission impossible, one of the most valuable recommendations that came out of the research on the financial crises is that individual emerging market countries could take steps to prevent or at least significantly reduce the likelihood of crises. The recent M:i:III models are based on a more thorough set of microfoundations and employ a welfare analysis based on individual utility rather than on the objective of reducing the fluctuations in real gross domestic product (GDP) and inflation.

Keywords: globalization; monetary policy; financial crises; international effects; emerging market

Chapter.  6475 words.  Illustrated.

Subjects: Macroeconomics and Monetary Economics

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