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Chapter 26: Q.2 (page 692)

Leo Krippner, an economist at the Reserve Bank of New Zealand, publishes an 'Effective Monetary Stimulus' (EMS) measure, designed to gauge the stance of U.S. monetary policy. Go to the website http://www,rbnz.govt NZ/research-and-publications/research-programme/ additional-research/measures-of-the-stance-of-united states-monetary-policy and examine the EMS measure. Is monetary policy becoming tighter, or looser according to the measure?

Short Answer

Expert verified

The monetary policy began to tighten with the effect of the effective monetary stimulus to the measure as described by Leo Krippner.

Step by step solution

01

Concept introduction.

Effective monetary stimulation is the fiscal stimulus that is designed to stimulate the economy during a recession.

02

Explanation of solution.

According to the effective monetary stimulus, during the lower bound period, the major unconventional monetary events took place which eased up the monetary policy for the period of 2007 to 2012 .

From 2012 onwards the monetary policy began to tighten with the effect of the effective monetary stimulus as described by Leo Krippner.

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Most popular questions from this chapter

A "rate cycle" is a period of monetary policy during which the federal funds rate moves from its low point toward its high point, or vice versa, in response to business cycle conditions. Go to the St. Louis Federal Reserve FRED database, and find data on the federal funds rate (FEDFUNDS), real business fixed investment (PNFIC96), real residential investment (PRFIC96), and consumer durable expenditures (PCDGCC96). Use the frequency setting to convert the federal funds rate data to "quarterly," and download the data.

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