As was discussed at length in Jackson Hole last month, central banks have developed other tools, like quantitative easing and productive uses of their balance sheets.23 The efficacy and long-term effects of unconventional tools will only be known over time. There is another reason we should not count on monetary policy to solve everything.
Monetary policy is not well suited to deal with structural problems, and today’s challenges go far beyond temporary shocks. Fiscal policy can be a powerful tool to boost growth, from both the demand and supply sides.