What are the limitations of monetary policy?

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What are the limitations of monetary policy?

2007-04-04 01:26:38 · 2 answers · asked by Suki 2 in Social Science ➔ Economics

can anyone please give 5 examples

2007-04-04 02:08:14 · update #1

2 answers

Nominal interest rates can not be reduced below zero,so if inflation rate is zero or negative the economy can not be stimulated. Monetary policy is more effective in slowing the economy to reduce inflation.
There is also a timing problem because the effect takes six months to a year to be seen in economic activity.

2007-04-04 02:05:32 · answer #1 · answered by meg 7 · 1⤊ 0⤋

Monetary policy can not change demographics.
MP can not stop a recession.
MP can be used to cool an over heated stock market as the fed can raise margin rates.
MP can not grow more food, nor get it to market.
MP can not lower the price of oil.

2007-04-04 09:22:06 · answer #2 · answered by RayM 4 · 0⤊ 0⤋