Debates on Loose Monetary Policy

Abstract:

This article discusses some controversial views about loose monetary policy, including why developed economies took loose monetary policies, whether loose monetary policy can effectively increase aggregate demand, and whether loose monetary policy will bring excessive currency growth and inflation, asset price bubbles, deteriorating income distribution, zombie enterprises and delaying economic restructuring. In general, loose monetary policy has played a critical role in promoting economic recovery. There is no lack of insights into the views questioning the loose monetary policy, but they either lack evidence or overall consideration. Although loose monetary policy will have negative consequences, economic stagnation will be more damaging, therefore loose monetary policy is "the lesser of two evils".

Keywords: Monetary policy; Inflation; Asset price; Income inequality; Zombie firms

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