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De Economist

, Volume 141, Issue 1, pp 29–42 | Cite as

The recent failure of U.S. monetary policy

  • Martin Feldstein
Article

Summary

The very slow growth of the broad money supply has been a primary source of U.S. economic weakness in 1990 through 1992. The velocity link between M2 and the subsequent level of nominal GDP has not declined. But changes in bank reserves brought about by open market operations have had much less effect onM2 than the Fed anticipated for two reasons: (1) reserve requirements now apply to only a small fraction of totalM2; and (2) the new bank capital requirements limit some banks’ ability to lend. The Federal Reserve failed to appreciate the importance of these conditions and misjudged the strength of the monetary policy stimulus that it was providing.

Keywords

Monetary Policy Public Finance Open Market Federal Reserve Money Supply 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Stenfert Kroese 1993

Authors and Affiliations

  • Martin Feldstein

There are no affiliations available

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