On Sun, 13 Mar 1994 23:34:45 -0800 JKC said:
> . . . I get the feeling that
>the general view from the left, center and the right seems to indicate that
>monetary policy is not all that effective as an employment policy.
>
>I have not done a lot of review on the efficacy of monetary policy and would
>like to hear others opinions. What are other folks' opinions on the viability
>of
>monetary policy as an effective employment policy? Is the phillips curve
>vertical in the long run?
My impression (developed in an -- alas -- unpublished paper) is that one
can argue that the Phillips curve is indeed vertical in the very long-run
BUT: (1) the "natural" rate of unemployment (in more scientific lingo,
the non-accelerating inflation rate of unemployment or NAIRU) includes
the unemployment necessary to maintain a profit rate seen as adequate
by capitalists (the reserve army of labor); (2) this NAIRU is affected
by the hysteresis effect: persistent high unemployment (as in Thatcher's
England) leads to higher structural unemployment; and (3) government
training programs -- combined with high demand for labor -- have the
potential of lowering structural unemployment and thus the NAIRU.
Monetary policy has the problem of (1) the endogeneity of the
money supply, (2) asymmetries: liquidity squeezes work differently than
liquidity floods, and (3) see above.
in pen-l solidarity,
Jim Devine BITNET: jndf@lmuacad INTERNET: [EMAIL PROTECTED]
Econ. Dept., Loyola Marymount Univ., Los Angeles, CA 90045-2699 USA
310/338-2948 (off); 310/202-6546 (hm); FAX: 310/338-1950
