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Rules of the monetary game

Mishra, Prachi, (2016), “Rules of the monetary game”, VoxEU, 16 June

All monetary policies have external spillover effects. However, the domestic mandates of most central banks may not legally allow them to take spillovers into account, and may force them to undertake aggressive policies so long as they have some small positive domestic effect. This column looks at the rules of the game for responsible policy in such a context. It proposes a ‘traffic light’ system to identify policies that should be encouraged by the international community, policies that should be used temporarily and with care, and policies that should be avoided at all costs.

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