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Assessing the Powell policy review
Author(s) -
Hetzel Robert
Publication year - 2021
Publication title -
economic affairs
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.24
H-Index - 18
eISSN - 1468-0270
pISSN - 0265-0665
DOI - 10.1111/ecaf.12442
Subject(s) - nairu , economics , monetary policy , inflation (cosmology) , unemployment , keynesian economics , value (mathematics) , macroeconomics , inflation targeting , phillips curve , monetary economics , full employment , physics , machine learning , theoretical physics , computer science
Abstract To understand both how it controls inflation and how it trades off inflation with its goal of maximum employment, the Federal Reserve System uses a Keynesian framework in which monetary policy moves the unemployment rate relative to a presumed full employment value, termed the NAIRU (non‐accelerating inflation rate of unemployment). Because it does not know the value of the NAIRU, it pursues an expansionary monetary policy until inflation rises. This policy risks reviving the inflationary monetary policy of the 1970s.