OPEN ISSUES OF CURRENT MONETARY POLICY

Basic lesson from recent financial crisis has been that monetary policy based on inflation targeting and focused on consumer inflation and based on inflation targeting does not automatically guarantee financial stability. As a response, new kind of economic policy called macro-prudential policy has been created to safeguard financial stability. Monetary policy principles have remained unchanged and firmly focused on inflation targets. The decade of ultra-loose monetary policy has been driven by low output, low productivity and threat of deflation as being justified by policy makers. At the same time, during previous decade, the notion of fourth industrial revolution (digital revolution) has been increasingly discussed. Once this phenomenon is at least partly accepted, the problems with measurement of macroeconomic indicators have been gaining on importance. Under new economic circumstances, output and productivity may be undervalued shedding different light to the nature of too low inflation and growth. The phenomenon of deflation should be revisited in modern macroeconomics with special attention paid to how address the issue of present quite low inflationary environment in current monetary policy frameworks without side effects. Such a deeper understanding would help to strike a delicate balance between the risk of overreaction, on the one hand, and of insufficient preemptiveness, on the other one. The debate about whether monetary policy should or should not "lean against the wind" had started as early as in Seventies and might be useful to be revisited as well. At the same time, monetary policy rule incorporating at least some monetary or financial stability indicators may be more efficient than the current status quo.