Is Monetary Policy Overburdened Literature review

Is Monetary Policy Overburdened - Literature review Example The monetary policy, today, is not expected to achieve goals it used to achieve before. Unemployment and inflation are speculated to persist if overburdening of the monetary policy continues. Whenever the employment rates suddenly increase, the central bank is forced to print more money for salaries, but, this is not a solution to inflation. During the crisis, central banks focused on price stability and at this time, they became independent institutions dominating the control of inflation without interference from the government. At that time, they achieved their goal in controlling inflation, but in 2008 and 2009, the inflation rate started increasing. The governments doubted on the credibility of central banks in maintaining price stability. Today, most central banks are not independent in their operations and that is why public policies from the government are overburdening the monetary policies. Price stability may not be realized if the public policies continue to overburden the monetary policies posing a threat to economies in the future (Orphanides 2013, p. 2). The monetary policy is aimed at stabilizing the price levels of goods and commodities in accordance with the state of the economy. The global financial crisis incorporated inflation which led to a continued increase in unemployment rates. Governments rushed to reduce their spending and reduce unemployment rates that resulted in overburdening of the monetary policy. The monetary policy has been practiced before and deflation was achieved, and thus, stabilizing the price levels. Before the financial crisis, discussions on what constitutes a good monetary policy run among the major central banks where they agreed on the practice of targeting inflation (Orphanides 2013, p. 2). At the first stages of the global financial crisis, disappointing growth was associated with many economies. The real GDP was maintained in countries like the US, the United Kingdom, and Japan.