Consequently, the bar for the use of nontraditional policies is higher than for traditional policies.” 2 With this principle in mind, my aim is to lay out the thought process that I am bringing to bear in an effort to decide just how high the bar should be, and whether a proposed action clears that bar.
Along the way I also hope to highlight some gaps in economists’ collective understanding about LSAPs, and perhaps to provoke some further thought and research on these questions. However, let me begin by setting the context. The point of departure for any analysis of monetary policy is our dual mandate – to foster maximum employment and price stability.