Crisis and Credit Allocation

Characterizing monetary policy as “easy” or “tight” can be misleading and uninformative. The interpretation of monetary policy must include not only changes in policy variables, but the ideologies of those who shape policy, because ideology informs the aims of policymakers and their interpretation of data. This can be demonstrated by examining the actions of the Federal Reserve under Adolph Miller in the 1920s and 30s and Ben Bernanke at the time of the 2008 financial crisis.