A metaphor attributed to John Maynard Keynes maintains that using monetary policy to fight a severe recession is like “pushing on a piece of string.” When the problem is inflation, pushing up interest rates (pulling on a string) is a pretty effective policy tool — ask anyone who lived through the Volcker recession of the early 1980s. But when rates are pushed down to stimulate economic activity the ‘push’ becomes less and less effective the closer to zero rates get.
The Last Days of Pushing on a String
A metaphor attributed to John Maynard Keynes maintains that using monetary policy to fight a severe recession is like “pushing on a piece of string.” When the problem is inflation, pushing up interest rates (pulling on a string) is a pretty effective policy tool — ask anyone who lived through the Volcker recession of the […]
August 07, 2012
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Accelerate your career with Harvard ManageMentor®. HBR Learning’s online leadership training helps you hone your skills with courses like Global Collaboration. Earn badges to share on LinkedIn and your resume. Access more than 40 courses trusted by Fortune 500 companies.
Learn how to overcome barriers when working globally.