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Newsletter
Teaching the Linkage Between Banks and the Fed: R.I.P. Money Multiplier
The money multiplier has been a standard concept in introductory economics classes for decades, but changes in the way the Fed implements monetary policy has made the model obsolete. This issue provides information about the linkages between the Fed and the banking system and provides teaching suggestions.
Challenges to the Fed’s New Monetary Policy Strategy
This post discusses some potential challenges the FOMC may face in pursuing a flexible average inflation targeting approach.
Key Elements of the Fed’s New Monetary Policy Strategy
In August, the Fed announced completion of its framework review that resulted in a new monetary policy strategy. How does the new strategy differ from the previous one?
Newsletter
Inflation Expectations, the Phillips Curve, and the Fed’s Dual Mandate
This Summer 2021 issue of Page One Economics describes how to think about stable prices, how inflation has evolved in recent years, how the relationship between inflation and employment is changing, and what the Federal Open Market Committee (FOMC) has recently stated about its strategy to meet its price stability goal.
Journal Article
The Fed’s New Monetary Policy Framework One Year Later
St. Louis Fed President James Bullard discusses the implementation of the FOMC’s new monetary policy framework, which includes flexible average inflation targeting.
Newsletter
Minding the Output Gap: What Is Potential GDP and Why Does It Matter?
Potential output is an estimate of what the economy could produce. Actual output is what the economy does produce. If actual is below potential -- a negative output gap -- there is "slack" in the economy. If actual is above potential -- a positive output gap -- resources are fully employed, or perhaps overutilized. This issue of Page One Economics explains how the output gap is useful for checking the health of the economy. It also points out how errors in the estimation of potential real GDP can reduce the effectiveness of policy.