The New Monetary Policy: Is this the Appropriate One?

Abstract

The objective of this research is to measure the economic consequences and the social interest of the new Monetary Policy after 2008. We want to
determine its effectiveness and efficiency, its social costs and social benefits, and to evaluate its optimality and its appropriateness. We are using different policy rules, by dividing in four different regimes the period 2008-2025, and a VAR model, to test the effectiveness and efficiency of monetary policy by testing the effects of policy instruments (iFF, MB, Ms) on the objective variables, prices (CPI), unemployment (u), growth of GDP (RGDP), stock market (DJIA), and long-term interest rate (i10YTB). By measuring the bail in cost on depositors and the bail out cost on taxpayers, we can have an indicator of its appropriateness and optimality of this policy. The empirical results show that the most of the public policy tools do not have a significant effect on the objective variables. The benefits, lately, are insignificant and the social cost enormous and the reason might be the incompetence or the corruption of the
financial system or the control of the policy makers by foreign powers. They must know what the true objective of their policy is, but they cannot satisfy it, which is the maximization of the social welfare, the wellbeing in every sector in the lives of the citizens of the country. There is a need to fix all these dysfunctional institutions and improve our democratic system, but if not impossible, it is very difficult and too late. What their new liberal public policies have caused people is just uncertainty (financial market risk), inflation, divisions, an enormous social cost, and pessimism for the future.