
Contents
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Where We Have Been and Where We Are Now Where We Have Been and Where We Are Now
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A Few Essential Ingredients A Few Essential Ingredients
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Should the Unconventional Become Conventional? Should the Unconventional Become Conventional?
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Changing the Message and Improving the Strategy Changing the Message and Improving the Strategy
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The Inflation Solution and Deflation Mongering The Inflation Solution and Deflation Mongering
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Evaluating the Unobserved: The Natural Rate Question Evaluating the Unobserved: The Natural Rate Question
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The Uses and Abuses of Rules The Uses and Abuses of Rules
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Leaving the Status Quo Ante Behind Leaving the Status Quo Ante Behind
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Bretton Woods Reimagined? Bretton Woods Reimagined?
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Conclusions: Use as Directed Conclusions: Use as Directed
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7 Trust, But Verify: The Road Ahead
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Published:August 2017
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Abstract
Taking stock of the past fifteen years in monetary policy leads to some conclusions and suggestions for reform. Contrary to the claims of some observers, price stability remains an unassailable goal of central banks. Reforms are needed in their governance, however. In particular, legislation ought to include more directives to make clear the conditional relationship between government and the central bank. Unconventional central bank policies are no longer so unconventional. While they should be included in the toolkit of policy instruments, they should be used with more care. Some central banks have overreached and have confused the need to put a floor on economic downturns with the need for economic growth to rise to levels deemed normal. Data dependence as a policy stance reflects one of the biggest failures of central banking. After more than a decade of explaining the forward-looking nature of monetary policy, a backward-looking perspective seems to dominate policy discussions.
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