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What is Wrong with our Monetary Policy?
Center for Financial Stability (2016)
  • Warren Coats
Former Chief of the SDR Division at the IMF Warren Coats unpacks a statement by Senator Jeff Merkley that

"The Fed should be using its economic expertise to highlight the long-term devastating impacts of failing to provide the opportunity for the skills needed for the economy of the future." [1]

Warren's paper examines monetary management in the United States - since the Nixon shock of closing the gold window and launching wage and price controls - to research the statement above.  He finds:

- No tradeoff exists between employment and inflation in the long run.
- Radical innovations in New Zealand sparked rules that ultimately fell short of expectations.
- NGDP targeting ignores the benefits of stable money.
- The return to a hard anchor for monetary policy - such as the SDR - is attractive. 

Although CFS is not promoting the idea of a newfound use for the SDR, monetary policy is in need of a rethink.  Warren's ideas are thoughtful and informative. 

To view the full paper:

As always, CFS welcomes opinion.

Sincerely yours,
Larry Goodman
  • Fed,
  • Monetary policy,
  • quantitative easing,
  • SDR,
  • inflation targeting,
  • policy interest rate,
  • hard anchor
Publication Date
October 5, 2016
Citation Information
Warren Coats. "What is Wrong with our Monetary Policy?" Center for Financial Stability (2016)
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Creative Commons license
Creative Commons License
This work is licensed under a Creative Commons CC_BY International License.