Declining economic growth strengthens the temptation to loosen monetary policy. But in today s deflationary environment, typical monetary expansion alone can do little to help the real economy, because the money either remains idle or fuels asset bubbles and capital outflows.

Will Germany agree to such a relaxation or, for that matter, to Hollande s implicit demand that the ECB follow Japan s example and loosen monetary policy to drive the exchange rate back down?

How the euro would be able to depreciate, given that it is a floating currency with very little intervention that is, the exchange rate is largely market determined depends on monetary policy. If the ECB agreed to loosen monetary policy or provide enough liquidity to support various bailouts, investors would fear inflation, weakening the euro.

China s Monetary Policy Surprise

China s Monetary Policy Choice

Monetary policy and institutions

Loosen it.

Why is Monetary Policy Underrated?

Shinzo Abe s Monetary Policy Delusions

1. Strongly anti inflationary monetary policy.

What Monetary Policy Does China Need?

I'll loosen my belt.

Don't loosen them too far. If you loosen them too far, you'll have a big mess.

Is US Monetary Policy Made in China?

It is time to adjust monetary policy.

These exclusive affairs of State include external relations, defence policy and monetary policy.

Loosen the knot in my tongue,

Don't be so quiet, Loosen up.

More than the usual blame game is at work here. Pressures are mounting on the ECB to raise interest rates and Berlusconi and Co. s attacks are as much as an attempt to forestall future rate hikes as to get the ECB to loosen its monetary policy.

and loosen the knot from my tongue

Will you loosen my sash for me?

Take off your coat. Loosen your collar.

Now, old fool, loosen up your tongue.

She won't loosen up with it, Lucky.

Typically, monetary policy is one of the policy tools for managing the balance of payments.

The market had strongly expected adjustments to UK monetary policy.

With such policies in place, the comfort zone for central banks is enlarged sufficiently to loosen monetary policy. Equally important, the central bank needs to signal to the public that it now cares about the real exchange rate, because it is important to exports, jobs, and sustainable growth.

Of course, a country s monetary policy does affect exchange rates in the short term. But it does so only in relation to monetary policy in other relevant countries.

Yoshiko will loosen him up a bit, right?

Against this background, the ECB has yielded to immense political pressure, particularly from France and Italy, to loosen monetary policy further and weaken the exchange rate. But indulging the old political reflex of manipulating the exchange rate to create a competitive advantage will yield a short term fix at best.

Well, put her on the bed and loosen her...

To support this effort, China s government should loosen its grip on the exchange rate, while maintaining appropriate capital controls. Renminbi internationalization should not be a policy priority.

The territorial Executive shall be consulted with respect to decisions on monetary policy.

In any case, the success of monetary policy is difficult to deny. As the deflation gap narrows, however, the overall impact of monetary policy will weaken, as it increasingly influences prices more than output.

Still to be argued out within the guild of economists , Samuelson wrote in 1969, is the proper quantitative potency of monetary versus fiscal policy. This question eventually was resolved in favor of monetary policy.

This is not the type of volatile monetary policy that Europe wants or needs.

Monetary policy needs to look beyond its core focus on low and stable inflation and pay much greater attention to financial stability. The debate now is how, exactly, to factor this imperative into monetary policy, and how to coordinate the work of monetary and regulatory authorities.

Moreover, unlike major developed economies, most of which have used up all of their conventional monetary policy ammunition by reducing their policy interest rates to zero, China has plenty of monetary stimulus on reserve to address cyclical disruptions. In these circumstances, it makes sense for China to lean more on monetary policy than on fiscal expansion.

Domestic monetary policy has become the first and last line of defense against growth slowdowns and financial panics, enabling policymakers to avoid pursuing other important, but far more difficult measures. Using monetary policy to compensate for deficiencies in other policy areas constitutes an institutional breakdown monetary policymakers are not necessarily getting it wrong, but they are constrained by the configuration of other policies.

If monetary policy is used to try to push unemployment below some pre determined level, inflation will accelerate without limit and destroy jobs. A monetary policy aiming for sub NAIRU unemployment must therefore be avoided at all costs.

Europe s monetary unification of the 1990 s was supposed to be accompanied by fiscal convergence and harmonization. When budgets move in different directions, pressures shift to regional policy (to redistribute income) and to monetary policy (to boost growth).

The current approach, centered on unconventional monetary policy, is not the answer. Though monetary policy provided a powerful antidote to frozen credit markets in the depth of the global financial crisis, it has failed to spark classic cyclical recoveries.

The ECB has never claimed that its strategy is the ultimate solution to the challenges monetary policy is confronted with. But, it has recognised the need to include monetary analysis in a very broad sense into its policy considerations.

Europe s central bankers fear that their political masters will order them to loosen monetary policy, that the structural reforms needed to free up aggregate supply will not be forthcoming, and that the result will be a return to the inflation of the 1970 s. In short, they fear that all of the sacrifices made for price stability will have been in vain.

In China, unlike in advanced countries, monetary and sterilization policy are often one in the same. The degree to which monetary policy is expansionary depends on the degree to which the liquidity created by currency market intervention has been sterilized.