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Article: How Powerful Is Monetary Policy in the Long Run?
- Article from:
- Economic Review (Atlanta, GA)
- Article date:
- July 1, 1998
- Author:
CopyrightCOPYRIGHT 1998 Federal Reserve Bank of Atlanta. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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PRESS REPORTS ABOUT THE STATE OF THE ECONOMY OFTEN GIVE READERS THE IMPRESSION THAT MONETARY POLICY AND THE PEOPLE WHO DIRECT IT ARE QUITE POWERFUL. FOR EXAMPLE, AN ARTICLE IN THE WASHINGTON POST IN MARCH 1997 ASSERTS THAT "SECOND TO THE PRESIDENT, ALAN GREENSPAN IS ARGUABLY THE NATION'S MOST POWERFUL PERSON. As CHAIRMAN OF THE FED, HE GUIDES U.S. MONETARY POLICY, ADJUSTING SHORT-RUN INTEREST RATES."(1)
Many prominent academic economists seem to agree that monetary policy is quite powerful. In reviewing the monetary policy experience of the 1970s, Nobel Laureate James Tobin wrote, "In one respect demand-management policies worked as intended in the 1970s.... the ...