Fed Chairman Ben Bernanke has recognized the limits of monetary policy, but he believes those limits have not been reached.
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But that's a reflection, Sir Mervyn said, of the inherent limits of monetary policy in today's environment.
There are limits to monetary policy: the Fed does not have the knowledge to bring about full employment, which requires flexible relative prices for all factors of production.
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Globalisation has not altered the basic limits: monetary policy can be used to regulate the domestic economy or to regulate the exchange rate, but it cannot successfully accomplish both goals at once.
Mr. Shirakawa, who had a brief stint as a university economics professor, again stressed the limits of monetary policy, rebutting calls among some lawmakers that the BOJ was solely to blame for the prolonged chronic price falls.
There are limits to what monetary policy can accomplish and to forecasting random variables like interest rates and asset prices.
But there are limits to what monetary policy can accomplish.
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Following a similar announcement by the Bank of England, the Fed's action understandably suggests central banks, having approached the limits of conventional monetary easing, are now experimenting with more monetarist solutions.
Monetary policy in both the United States and Europe has approached its limits.
The current BOE leadership has made clear that it believes the U.K. is approaching the limits of what can be achieved by ultra-loose monetary policy and that more of the burden of reviving growth must now fall on the government to adopt measures to make the economy more competitive.
Argentina's inflexible currency-board scheme not only pegs the peso at par to the dollar but limits the money supply to the level of hard-currency reserves, in effect turning monetary policy over to the United States' Federal Reserve.
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