[Biweekly Symposium] No.380, The dilemma of monetary economic
Author:Unirule
Time：2009-03-13 14:13:10 Clicks:
Topic: The dilemma of monetary economic Lecturer:Prof. Ren Ruoen Discussants:Prof. Shi Jianhuai, Prof. Zhang Bin, Prof. He Ping, Prof .Sheng Hong, Prof. Zheng Chaoyu, Prof. Mao Yushi
At the 380th Unirule bi-weekly symposium, Prof. Ren Ruoen from department of economics, Beijing University of Aviation, gave a speech on the subject of “The dilemma of monetary economic”.
Prof. Ren began this lecture by criticizing the widely hold monetary equation MV=PY. Instead, he argued that the central bank should not only consider the real economy but also the financial market when setting monetary policy. He gave two examples to support his argument. The Japanese central bank did everything it could do to curb inflation during the 1980’s. However, in the next decade Japan faced serious deflation. If the Japanese people had not been so picky about inflation during the 1980’s, there would be much more room to stimulus the economy in the 1990’s.
The other example is China last year. The Chinese authorities also took the traditional monetary theory too seriously. They implement whatever they could to curb China’s inflation back then. Even when the price level is decreasing on a month to month base. They still raised the interest rate. In fact, according to Prof. Ren, they had over reacted. And to a large extent, the recessions in the months followed should partly blamed on the over tighten monetary policy in 2007 and 2008.
So Prof. Ren argued that it’s time that we should consider to reshape the macroeconomic completely, like what Keynes did after the great recession. During the discussion session, the Prof. Ren exchanged views with the discussants on this matter.
