Current monetary policy: a review of recent literature

This paper is a review of the different views presented by a selection of economists on the stance of monetary policy in Australia during 1988 and 1989. The views are classified into four broad categories: 1. Support for the current monetary policy stance. 2. Misdirection of the stance; the current account deficit is an inappropriate target for monetary policy. 3. The inappropriateness of the 'check list' approach. 4. Current monetary policy is 'too tight'. The article takes each of these categories in turn, summarises the main arguments presented by economists who appear to adhere to this view and considers the implications of this view for future government policy. This paper makes no attempt to assess the different views on monetary policy. This is left to the performance of the economy in 1990.