Policy Article

Is monetary policy in the US too expansive? (original publication in German)

Kiel Policy Briefs, 26

The Kiel researchers Nils Jannsen and Joachim Scheide investigate, whether the extremely expansionary monetary policy of the Fed in the United States is still appropriate. An analysis based on the Taylor rule indicates that it is very likely that monetary policy in the United States is too expansionary. This poses considerable risks for price stability and for the credibility of the Fed. Furthermore, exaggerations in other markets, such as asset or commodity markets, are promoted. Therefore, the Fed should start communicating that monetary policy could be tightened soon if economic conditions do not change dramatically, that it does not apply further measures of Quantitative Easing and that it will start to reduce its balance sheet.

Authors

Joachim Scheide

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