@tutor2uEcon @lindayueh /1 A central bank is in no way equipped to directly drive the factors of economic growth. The influential factors for economic growth are: Fiscal policy: tax policy (tax rates & savings, the mix of taxes & Marginal Effective Tax Rates on investment in particular). Labour policy:
@tutor2uEcon @lindayueh 2/ Labour policy (education, training, retraining; and other factors related to enabling people to ups kill and learn about better paying jobs they can be productive in). Related to this is education & training systems to help get that training available. Also R&D: private ...
@tutor2uEcon @lindayueh 3/ R&D: private and public sector development of ideas at some point into goods and services saleable to the world. policy affects this as well for good or ill. Also trade policy affects growth by enabling the purchasing/sale of goods and services. Also investment policy ...
@tutor2uEcon @lindayueh 4/ investment policy affects growth as well with investment overseas and FDI affected by policy which affects growth as well. all of this and more sits in the hands of politicians as fiscal policy. Central banks are there to manage the government's debt issuances, and deal with .
@tutor2uEcon @lindayueh 5/ deal with financial stability: maintaining financial system integrity (in conjunction with various other financial system regulators) via such things as high value transfer system, exposing gaps in the system to the light of day (and encouraging legislation where needed), ...
@tutor2uEcon @lindayueh 6/ and acting as lender of last resort. The target of inflation is chosen to help keep financial pathologies from impinging on and distorting the real economic signals that are necessary for making decisions that do affect economic growth. Too high of inflation also imposes costs
@tutor2uEcon @lindayueh 7/ inflation costs such as having to quickly spend any local currency quickly to avoid nominal value losses, having to change prices far more often. Low stable inflation is what enables fiscal policy to work and fiscal policy is what directly affects long run economic growth. Fin
@tutor2uEcon @lindayueh So let's leave central banks to do what they do best: dealing with financial system issues and keeping inflation low and stable. Then fiscal policy has the room to work to enable economic growth.
