The G20 and Monetary Policy Stasis

Andrew Baker

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Abstract

Since the financial crash of 2008 monetary policy has been in a state of stasis – a condition in which things are not changing, moving, or progressing, but rather appear frozen. Interest rates have been frozen at low levels for a considerable period time. Inflation targets have consistently been missed, through phases of both overshooting and undershooting. At the same time, a variety of unconventional monetary policies involving asset purchases and liquidity provision have been pursued. Questions have been raised from a variety of sources, including various international organizations, covering distinct BIS and IMF positions about the continuing validity and sustainability of existing monetary policy frameworks, not least because inflation targeting has ceased to act as reliable guide for policy for over six years. Despite this central banks have been reluctant to debate moving to a new formal policy framework. This article argues that as an apex policy forum only the G20 leaders’ summits has the necessary political authority to call their central banks to account and initiate a wide ranging debate on the future of monetary policy. A case is made for convening a monetary policy working group to discuss a range of positions, including those of the BIS and IMF, and to make recommendations, because the G20 has been most effective in displaying international financial leadership, when leaders have convened and made use of specialist working groups.
Original languageEnglish
Pages (from-to)19-31
Number of pages12
JournalInternational Organisations Research Journal
Volume9
Issue number4
Publication statusPublished - 2014

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