Powell, Jeff ORCID: https://orcid.org/0000-0001-7962-3101 (2023) Feminist perspectives on monetary policy. Discussion Paper. Women's Budget Group, London.

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Abstract

Executive Summary
This research takes as its point of departure that the continued dominance of monetary policy for macroeconomic management provides an imperative for feminist interventions on this critical area of public policy. Such a perspective can reveal not only important gendered distributional implications of monetary policy for consumption, income, employment and wealth, but also how these outcomes in turn impact upon gendered roles and power in the household, workplace and public spaces, and our collective ability to build a more caring society.
The New Keynesian Economics (NKE) monetary policy (MP) framework has for over three decades stood behind the conventional approach to central banking and monetary policy, that of an independent central bank using short-term interest rates to target an inflation rate of 2%, the so-called 'inflation targeting regime'. In terms of distribution, the balance of empirical evidence suggests that contractionary (/expansionary) conventional monetary policy (CMP) leads to increased (/decreased) income and wealth inequality. The crisis of 2008 posed an important challenge to NKE monetary policy orthodoxy. It became clear that the requisite turn to unconventional monetary policy (UMP), most notably quantitative easing (QE), was reliant on a wealth effect for impact, bringing increased attention to distribution.
Expansionary UMP appears to have increased income and wealth inequality in the UK. To date very little research exists which examines the gendered distributional impact of either CMP or UMP. The distributional impacts of both CMP and UMP are not unambiguous; a range of institutional characteristics, the nature of central bank intervention, and the fiscal framework into which MP is conducted, all play a role in determining the ultimate distributional outcome of a particular set of MP measures. Also important, and under-researched, is the impact of the timing of intervention and the asymmetry of the impacts over the business cycle.
The NKE framework is beset by a number of fundamental problems. These include its grounding in the controversial theoretical precept of a 'natural' interest rate; the arbitrary choice of inflation target; tenuous support for the hypothesised impacts of incremental changes in the short-term interest rate on output and inflation; and an over-emphasis on the role of domestic wage pressure in generating, and therefore managing, inflationary pressures. A feminist approach to monetary policy, by abandoning the shibboleths of the NKE framework, could adopt a very different approach: moving from a rigid focus on price stability to the recognition of complex social realities in its goals; considering the use of a broader range of central bank tools to target real variables in addition to price stability; and taking a less dogmatic approach to inflation management involving both a more nuanced understanding of causality and greater willingness to cooperate with fiscal authorities in addressing its impact.
What would reform of monetary policy from a feminist perspective look like in concrete terms? More easily accomplished will be those reforms which do not threaten the hegemonic NKE monetary policy framework. This would include: criteria for increased diversity on both formal governance bodies of central banks and citizens' forums which provide feedback on central bank policy; greater attention to gender, race and class in data-gathering exercises; research into the impact of gender discrimination on monetary policy transmission; ex-ante impact assessments of the gender, race and class-based impacts of proposed monetary policy; and greater public accountability for the central bank over investment in the care economy. While such reforms may be important in their own right, they run the risk of becoming gender ‘window dressing' and even perhaps reinforcing the ongoing commodification and financialisation of care.
In the longer-term, more fundamental reforms that challenge the hegemonic model of NKE MP must be considered: revisiting central bank goals and independence; a greater role for the central bank in channelling low-cost credit to social and environmental priorities; the integration of social and environmental standards into capital requirements and financial regulation; and greater coordination with Treasury to ensure the financial sustainability of increased public investment in and support of a caring economy. However, any such calls for a more interventionist role of the Bank of England in pursuit of gender equity must be carefully calibrated so as not to endorse monetary dominance, given the greater effectiveness of fiscal policy to directly impact a range of macroeconomic outcomes, distribution and gender equity. Moreover, it is clear that any such challenges to monetary policy orthodoxy will face significant opposition from powerful voices within policy circles, the private sector and academia.

Item Type:	Monograph (Discussion Paper)
Additional Information:	This paper was commissioned by the Women's Budget Group, as a part of its work on feminist economics and macroeconomic policy. The views expressed here are solely those of the author and do not necessarily represent the Women's Budget Group's views. The author is solely responsible for the paper's accuracy and content, and the Women's Budget Group does not endorse or take responsibility for any presented information or interpretations.
Uncontrolled Keywords:	monetary policy; monetary economics; central bank; feminist economics; gender
Subjects:	H Social Sciences > H Social Sciences (General) H Social Sciences > HB Economic Theory J Political Science > JA Political science (General)
Faculty / School / Research Centre / Research Group:	Faculty of Business Greenwich Business School > Political Economy, Governance, Finance and Accountability (PEGFA)
Related URLs:	Organisation
Last Modified:	02 Dec 2024 16:08
URI:	http://gala.gre.ac.uk/id/eprint/44164

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