Editing Monetary policy (section)

== Monetary policy instruments ==

The instruments available to central banks for conducting monetary policy vary from country to country, depending on the country's stage of development, institutional structure and political system.<ref name=palgrave>Lindsey, D.E., Wallich, H.C. (2018). Monetary Policy. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. Retrieved August 15, 2023.</ref> The main [[Macroeconomic policy instruments|monetary policy instruments]] available to central banks are [[#Interest rates|interest rate policy]], i.e. setting (administered) interest rates directly, [[open market operation]]s, [[forward guidance]] and other communication activities, bank [[reserve requirement]]s, and re-lending and re-discount (including using the [[term repurchase]] market). While [[capital adequacy]] is important, it is defined and regulated by the [[Bank for International Settlements]], and central banks in practice generally do not apply stricter rules.

Expansionary policy occurs when a monetary authority uses its instruments to stimulate the economy. An expansionary policy decreases short-term interest rates, affecting broader financial conditions to encourage spending on goods and services, in turn leading to increased employment. By affecting the [[exchange rate]], it may also stimulate [[net export]].<ref name="StLouis">{{cite web |title=Expansionary & Contractionary Monetary Policy: In Plain English |url=https://www.stlouisfed.org/in-plain-english/expansionary-and-contractionary-policy |website=www.stlouisfed.org |publisher=Federal Reserve Bank of St. Louis |access-date=15 August 2023 |language=en}}</ref> Contractionary policy works in the opposite direction: Increasing interest rates will depress borrowing and spending by consumers and businesses, dampening inflationary pressure in the economy together with employment.<ref name="StLouis"/>

=== Key interest rates ===

[[File:Federal_Open_Market_Committee_(FOMC)_in_Washington_DC_April_26-27,_2016.jpg|thumb|375x375px|2016 meeting of the Federal Open Market Committee at the [[Eccles Building]], Washington, D.C.]]
For most central banks in advanced economies, their main monetary policy instrument is a short-term interest rate.<ref name=RBA>{{cite web |last1=Baker |first1=Nick |last2=Rafter |first2=Sally |title=An International Perspective on Monetary Policy Implementation Systems {{!}} Bulletin – June 2022 |url=https://www.rba.gov.au/publications/bulletin/2022/jun/an-international-perspective-on-monetary-policy-implementation-systems.html |publisher=Reserve Bank of Australia |access-date=13 August 2023 |language=en-AU |date=16 June 2022}}</ref> For monetary policy frameworks operating under an exchange rate anchor, adjusting interest rates are, together with direct intervention in the [[foreign exchange market]] (i.e. open market operations), important tools to maintain the desired exchange rate.<ref>{{cite web |title=Fixed exchange rate policy |url=https://www.nationalbanken.dk/en/frequently-asked-questions/fixed-exchange-rate-policy |website=Nationalbanken |access-date=13 August 2023 |language=en}}</ref> For central banks targeting inflation directly, adjusting interest rates are crucial for the [[monetary transmission mechanism]] which ultimately affects inflation. Changes in the central bank policy rates normally affect the interest rates that banks and other lenders charge on loans to firms and households.

Higher interest rates reduce inflation by reducing aggregate [[Consumption (economics)|consumption]] of goods and services by several causal paths.<ref>{{cite web |url=https://www.employamerica.org/researchreports/how-the-fed-affects-inflation/ |date=February 9, 2022 |author1=Skanda Amarnath |author2=Alex Williams |title=What Are You Expecting? How The Fed Slows Down Inflation Through The Labor Market}}</ref> Higher borrowing costs can cause a cash shortage for companies, which then reduce direct spending on goods and services to reduce costs. They also tend to reduce spending on labor, which in turn reduces household income and then household spending on goods and services. Interest rate changes also affect [[asset prices]] like [[stock price]]s and [[Real estate appraisal|house prices]]. Though unless they are selling or taking out new loans their cash flow is unaffected, asset owners feel less wealthy (the [[wealth effect]]) and reduce spending.

Rising interest rates also have smaller secondary effects, which decrease supply and tend to increase inflation (or cause it to decrease more slowly than it otherwise would. On the individual side, rising mortgage rates disincentivize wealthy homeowners from downsizing or moving to a new home if they have an existing mortgage that is locked in at a low fixed rate.<ref>{{cite news |url=https://www.marketplace.org/2024/02/19/housing-market-mortgage-rates-inventory/ |date=February 19, 2024 |publisher=Marketplace |title=High mortgage rates, low inventory keep the housing market tight |author=Mitchell Hartman}}</ref> On the business side, lower investment and spending may result in lower supply of new homes and other goods and services.

Firms experiencing high borrowing costs are also less willing or able to borrow or spend money on [[investment]] in new or expanding business. International interest rate differentials also affect exchange rates, and consequently [[exports]] and [[imports]]. Consumption, investment, and net [[exports]] are all important components of aggregate demand. Stimulating or suppressing the [[aggregate demand|overall demand]] for goods and services in the economy will tend to increase respectively diminish inflation.<ref name="Fed goals II">{{cite web |title=Federal Reserve Board - Monetary Policy: What Are Its Goals? How Does It Work? |url=https://www.federalreserve.gov/monetarypolicy/monetary-policy-what-are-its-goals-how-does-it-work.htm |website=Board of Governors of the Federal Reserve System |access-date=13 August 2023 |language=en |date=29 July 2021}}</ref>

The concrete implementation mechanism used to adjust short-term interest rates differs from central bank to central bank.<ref>{{cite book |title=MC Compendium Monetary policy frameworks and central bank market operations |date=October 2019 |publisher=Bank for International Settlements |isbn=978-92-9259-298-1 |url=https://www.bis.org/publ/mc_compendium.pdf}}</ref> The "policy rate" itself, i.e. the main interest rate which the central bank uses to communicate its policy, may be either an administered rate (i.e. set directly by the central bank) or a market interest rate which the central bank influences only indirectly.<ref name=RBA/> By setting administered rates that commercial banks and possibly other financial institutions will receive for their deposits in the central bank, respectively pay for loans from the central bank, the central monetary authority can create a band (or "corridor") within which market interbank short-term interest rates will typically move. Depending on the specific details, the resulting specific market interest rate may either be created by open market operations by the central bank (a so-called "corridor system") or in practice equal the administered rate (a "floor system", practiced by the Federal Reserve<ref>{{cite web |last1=Ihrig |first1=Jane |last2=Wolla |first2=Scott A. |title=The Fed's New Monetary Policy Tools |url=https://research.stlouisfed.org/publications/page1-econ/2020/08/03/the-feds-new-monetary-policy-tools |website=research.stlouisfed.org |publisher=Federal Reserve Bank of St. Louis |access-date=13 August 2023 |language=en |date=August 2020}}</ref> among others).<ref name=RBA/><ref>{{cite web |last1=Whelan |first1=Karl |title=International Money and Banking: 8. How Central Banks Set Interest Rates |url=https://www.karlwhelan.com/IMB/part8.pdf |website=www.karlwhelan.com |date=Spring 2020}}</ref>

As an example of how this functions, the [[Bank of Canada]] sets a target [[overnight rate]], and a band of plus or minus 0.25%. Qualified banks borrow from each other within this band, but never above or below, because the central bank will always lend to them at the top of the band, and take deposits at the bottom of the band; in principle, the capacity to borrow and lend at the extremes of the band are unlimited.<ref>Bank of Canada backgrounders: [https://www.bankofcanada.ca/wp-content/uploads/2010/11/target_overnight_rate_jan2016.pdf.pdf Target for the Overnight Rate]</ref>
[[File:10-year_minus_3-month_US_Treasury_Yields.png|right|thumb|400x400px|Yield curve becomes inverted when short-term rates exceed long-term rates.]]The target rates are generally short-term rates. The actual rate that borrowers and lenders receive on the market will depend on (perceived) credit risk, maturity and other factors. For example, a central bank might set a target rate for overnight lending of 4.5%, but rates for (equivalent risk) five-year bonds might be 5%, 4.75%, or, in cases of [[inverted yield curve]]s, even below the short-term rate.

Many central banks have one primary "headline" rate that is quoted as the "central bank rate". In practice, they will have other tools and rates that are used, but only one that is rigorously targeted and enforced. A typical central bank consequently has several interest rates or monetary policy tools it can use to influence markets.

* [[Discount window|Marginal lending rate]] – a fixed rate for institutions to borrow money from the central bank. (In the United States, this is called the [[Discount window|discount rate]]).
* Main refinancing rate – the publicly visible interest rate the central bank announces. It is also known as ''minimum bid rate'' and serves as a bidding floor for refinancing loans. (In the United States, this is called the [[federal funds rate]]).
* Deposit rate, generally consisting of interest on reserves – the rates parties receive for deposits at the central bank.

=== Open market operations ===
[[File:Mechanism of Open Market Operations in Market for Reserves.svg|thumb|Mechanics of open market operations: Demand-Supply model for reserves market]]
Through [[open market operation]]s, a central bank may influence the level of interest rates, the exchange rate and/or the money supply in an economy. Open market operations can influence [[interest rate]]s by expanding or contracting the [[monetary base]], which consists of currency in circulation and banks' reserves on deposit at the central bank. Each time a central bank buys [[Security (finance)|securities]] (such as a [[government bond]] or treasury bill), it in effect [[Money creation|creates money]]. The central bank exchanges money for the security, increasing the monetary base while lowering the supply of the specific security. Conversely, selling of securities by the central bank reduces the monetary base.[[File:1979 $10,000 Treasury Bond .jpg|thumb|1979 $10,000 [[United States Treasury security|United States Treasury bond]]]] Open market operations usually take the form of:

* Buying or selling securities ("[[direct operations]]").
* Temporary lending of money for [[Collateral (finance)|collateral]] securities ("Reverse Operations" or "[[Repurchase agreement|repurchase operations]]", otherwise known as the "repo" market). These operations are carried out on a regular basis, where fixed [[Maturity (finance)|maturity]] loans (of one week and one month for the ECB) are auctioned off.
* [[Foreign exchange market|Foreign exchange]] operations such as [[foreign exchange swap]]s.

=== Forward guidance ===
{{Main|Forward guidance}}
Forward guidance is a communication practice whereby the central bank announces its forecasts and future intentions to influence market expectations of future levels of [[interest rates]].<ref>{{cite journal |last1=Nelson |first1=Edward |title=The Emergence of Forward Guidance As a Monetary Policy Tool |url=https://www.federalreserve.gov/econres/feds/the-emergence-of-forward-guidance-as-a-monetary-policy-tool.htm |journal=Finance and Economics Discussion Series |publisher=Federal Reserve |access-date=13 August 2023 |language=en |doi=10.17016/FEDS.2021.033 |date=17 May 2021|volume=2021 |issue=32 |pages=1–59 |s2cid=235478990 |doi-access=free }}</ref> As expectations formation are an important ingredient in actual inflation changes, credible communication is important for modern central banks.<ref>{{cite book |last1=Blanchard |first1=Olivier |last2=Amighini |first2=Alessia |last3=Giavazzi |first3=Francesco |title=Macroeconomics: a European perspective |date=2017 |publisher=Pearson |location=Harlow London New York Boston San Francisco Toronto Sydney Dubai Singapore Hong Kong Tokyo Seoul Taipei New Delhi Cape Town São Paulo Mexico City Madrid Amsterdam Munich Paris Milan |isbn=978-1-292-08567-8 |edition=3rd}}</ref>

=== Reserve requirements ===
[[File:Response_of_malicious_rumours_of_BEA_on_24_Sept_2008.jpg|thumb|A run on a [[Bank of East Asia]] branch in Hong Kong, caused by "malicious rumours" in 2008]]
Historically, [[bank reserves]] have formed only a small fraction of [[Bank deposits|deposits]], a system called [[fractional-reserve banking]]. Banks would hold only a small percentage of their assets in the form of cash [[Bank reserves|reserves]] as insurance against bank runs. Over time this process has been regulated and insured by central banks. Such legal [[reserve requirement]]s were introduced in the 19th century as an attempt to reduce the risk of banks overextending themselves and suffering from [[bank run]]s, as this could lead to knock-on effects on other overextended banks.
[[File:US-$100-GC-1882-Fr.1207.jpg|thumb|[[Gold certificate (United States)|Gold certificate]]s were used as [[paper currency]] in the [[United States]] from 1882 to 1933. These certificates were freely convertible into [[gold coin]]s.]]
A number of central banks have since abolished their reserve requirements over the last few decades, beginning with the Reserve Bank of New Zealand in 1985 and continuing with the Federal Reserve in 2020. For the respective banking systems, bank [[capital requirement]]s provide a check on the growth of the money supply.

The [[People's Bank of China]] retains (and uses) more powers over reserves because the [[Renminbi|yuan]] that it manages is a non-[[convertible currency]].{{citation needed|date=May 2020}}

Loan activity by banks plays a fundamental role in determining the money supply. The central bank money after aggregate settlement – "final money" – can take only one of two forms:

* physical cash, which is rarely used in wholesale financial markets,
* central bank money which is rarely used by the people

The currency component of the money supply is far smaller than the deposit component. Currency, bank reserves and institutional loan agreements together make up the monetary base, called [[Money supply|M1, M2 and M3]]. The Federal Reserve Bank stopped publishing M3 and counting it as part of the money supply in 2006.<ref name="Fed ends M3 publishing">{{cite web|last=Reserve|first=Federal|title=Fed stops publishing M3|url=http://www.federalreserve.gov/releases/h6/discm3.htm|access-date=9 March 2006|work=press release|publisher=Federal Reserve Board}}</ref>

=== Credit guidance ===
{{Main|Window guidance}}
Central banks can directly or indirectly influence the allocation of bank lending in certain sectors of the economy by applying quotas, limits or differentiated interest rates.<ref>Werner, Richard (2002). 'Monetary Policy Implementation in Japan: What They Say vs. What they Do', Asian Economic Journal, vol. 16 no.2, Oxford: Blackwell, pp. 111–151; Werner, Richard (2001). Princes of the Yen, Armonk: M. E. Sharpe [https://books.google.com/books?id=8VwMxQY6Kj8C&q=princes+of+the+yen]</ref><ref>{{cite news|last1=Chan|first1=Szu Ping|date=2014-06-26|title=Bank of England cracks down on mortgages|newspaper=The Telegraph|url=https://www.telegraph.co.uk/finance/bank-of-england/10927409/Bank-of-England-cracks-down-on-mortgages.html |archive-url=https://ghostarchive.org/archive/20220112/https://www.telegraph.co.uk/finance/bank-of-england/10927409/Bank-of-England-cracks-down-on-mortgages.html |archive-date=2022-01-12 |url-access=subscription |url-status=live}}{{cbignore}}</ref> This allows the central bank to control both the quantity of lending and its allocation towards certain strategic sectors of the economy, for example to support the national industrial policy, or to environmental investment such as housing renovation.<ref>Bezemer, D., Ryan-Collins, J., van Lerven, F. and Zhang, L. (2018). [https://www.ucl.ac.uk/bartlett/public-purpose/wp2018-11 Credit where it’s due: A historical, theoretical and empirical review of credit guidance policies in the 20th century.] UCL Institute for Innovation and Public Purpose Working Paper Series (IIPP WP 2018-11).</ref><ref>{{Cite journal|last1=Böser|first1=Florian|last2=Senni|first2=Chiara Colesanti|date=June 2020|title=Emission-based Interest Rates and the Transition to a Low-carbon Economy|journal=Cer-Eth Economics Working Paper Series |url=https://ideas.repec.org/p/eth/wpswif/20-337.html|language=en}}</ref><ref>{{cite web|last1=Kedward|first1= K.|last2= Gabor|first2= D.|last3= Ryan-Collins|first3= J. |year=2022|title= Aligning finance with the green transition: From a risk-based to an allocative green credit policy regime. UCL Institute for Innovation and Public Purpose, Working Paper Series (IIPP WP 2022-11)|url= https://www.ucl.ac.uk/bartlett/public-purpose/wp2022-11|website=[[UCL School of Slavonic and East European Studies]]}}</ref>
[[File:Bank of Japan headquarters in Tokyo, Japan.jpg|thumb|The [[Bank of Japan]], in Tokyo, established in 1882]]
The [[Bank of Japan]] used to apply such policy ("window guidance") between 1962 and 1991.<ref>{{cite web|title=Effectiveness of Window Guidance and Financial Environment – In Light of Japan's Experience of Financial Liberalization and a Bubble Economy – : 日本銀行 Bank of Japan|url=https://www.boj.or.jp/en/research/wps_rev/rev_2010/rev10e04.htm/|access-date=2017-11-12|website=www.boj.or.jp|language=en}}</ref><ref>{{Cite report|author1=Rhodes |author2=Yoshino|title=Japan's Monetary Policy Transition, 1955–2004|url=http://fmwww.bc.edu/repec/esFEAM04/up.30042.1080738722.pdf}}</ref> The [[Bank of France|Banque de France]] also widely used credit guidance during the post-war period of 1948 until 1973 .<ref>Monnet, Éric. ''Controlling Credit: Central Banking and the Planned Economy in Postwar France, 1948–1973''. Cambridge: [[Cambridge University Press]], 2018.</ref> China is also applying a form of dual rate policy.<ref>{{Cite report |url=https://papers.ssrn.com/abstract=1914298 |title=Dual-Track Interest Rates and the Conduct of Monetary Policy in China |last1=He |first1=Dong |last2=Wang |first2=Honglin |date=2011-08-17 |location=Rochester, NY |language=en |ssrn=1914298}}</ref><ref>{{Cite journal |last1=Dikau |first1=Simon |last2=Volz |first2=Ulrich |year=2021 |title=Out of the window? Green monetary policy in China: Window guidance and the promotion of sustainable lending and investment |journal=Climate Policy |volume=23 |pages=1–16 |doi=10.1080/14693062.2021.2012122 |s2cid=245098383 |doi-access=free}}</ref>

The European Central Bank's ongoing TLTROs operations can also be described as a form of credit guidance insofar as the level of interest rate ultimately paid by banks is differentiated according to the volume of lending made by commercial banks at the end of the maintenance period. If commercial banks achieve a certain lending performance threshold, they get a discount interest rate, that is lower than the standard key interest rate. For this reason, some economists have described the TLTROs as a [[Dual interest rates|"dual interest rates" policy]].<ref>{{cite web|last1=Lonergan|first1=Eric|last2=Greene|first2=Megan|date=2020-09-03|title=Dual interest rates give central banks limitless fire power|url=https://voxeu.org/article/dual-interest-rates-give-central-banks-limitless-fire-power|access-date=2021-04-02|website=VoxEU.org}}</ref><ref>{{Cite news|last=Lonergan|first=Eric|title=European Central Bank has one item left in its toolkit: dual rates|url=https://www.ft.com/content/885d0f9c-2319-11ea-92da-f0c92e957a96 |archive-url=https://ghostarchive.org/archive/20221210/https://www.ft.com/content/885d0f9c-2319-11ea-92da-f0c92e957a96 |archive-date=2022-12-10 |url-access=subscription |url-status=live|access-date=2021-04-02|newspaper=Financial Times|date=2 January 2020}}</ref>

Civil society organizations and think tanks have proposed the introduction of a "green TLTRO" in order to lower the cost of funding and stimulate bank lending targeted at green projects,<ref>Van't Klooster, J. and Van Tilburg, R. (2020) ''[https://www.positivemoney.eu/wp-content/uploads/2020/09/Green-TLTROs.pdf Targeting a sustainable recovery with Green TLTROs]''. Positive Money Europe.</ref><ref>Jourdan, S., Van Tilburg, R., Kramer, B., Simić, A. and Bronstering, G. (2024) ''[https://sustainablefinancelab.nl/wp-content/uploads/sites/334/2024/09/A-green-interest-rate-for-Europe.pdf. A green interest rate for the Eurozone: evaluating the design choices]''. Sustainable Finance Lab.</ref><ref>{{cite news|last1=Randow|first1=Janow|last2=Horobin|first2=William|date=2022-06-01|title=Lagarde Has Open Mind on ECB Lending as a Climate-Crisis Tool|url=https://www.bloomberg.com/news/articles/2022-06-01/lagarde-has-open-mind-on-ecb-lending-as-a-climate-crisis-tool|department=Green, ESG & Investing|work=[[Bloomberg News]]|language=en-us|location=[[New York City]]|access-date=2024-12-08|url-access=subscription}}</ref> echoing the French President Emmanual Macron, who called for introducing "green interest rates".<ref>{{Cite web |last=Costa |first=Moriah |date=2023-12-13 |title=Macron endorses dual interest rates for green energy |url=https://greencentralbanking.com/2023/12/13/macron-dual-interest-rates-green-energy/ |access-date=2024-12-08 |website=Green Central Banking |language=en-GB}}</ref>

In 2021, the Bank of Japan and People's Bank of China have introduced differentiated interest rates on green dedicated refinancing operations.<ref>Caswell, G. (2021) ‘[https://greencentralbanking.com/2021/11/10/pboc-launches-targeted-green-lending PBoC launches targeted green lending]’, ''Green Central Banking'', 10 November. Available at:</ref><ref>{{Cite web |last=Clarke |first=David |date=2022-01-20 |title=BoJ green loans scheme gets underway |url=https://greencentralbanking.com/2022/01/20/japan-green-loans-scheme/ |access-date=2024-12-08 |website=Green Central Banking |language=en-GB}}</ref>

=== Exchange requirements ===
To influence the money supply, some central banks may require that some or all foreign exchange receipts (generally from exports) be exchanged for the local currency. The rate that is used to purchase local currency may be market-based or arbitrarily set by the bank. This tool is generally used in countries with non-convertible currencies or partially convertible currencies. The recipient of the local currency may be allowed to freely dispose of the funds, required to hold the funds with the central bank for some period of time, or allowed to use the funds subject to certain restrictions. In other cases, the ability to hold or use the foreign exchange may be otherwise limited.

In this method, the money supply is increased by the central bank when it purchases the foreign currency by issuing (selling) the local currency. The central bank may subsequently reduce the money supply by various means, including selling bonds or foreign exchange interventions.

=== Collateral policy ===
In some countries, central banks may have other tools that work indirectly to limit lending practices and otherwise restrict or regulate capital markets. For example, a central bank may regulate [[margin lending]], whereby individuals or companies may borrow against pledged securities. The margin requirement establishes a minimum ratio of the value of the securities to the amount borrowed.

Central banks often have requirements for the quality of assets that may be held by financial institutions; these requirements may act as a limit on the amount of risk and leverage created by the financial system. These requirements may be direct, such as requiring certain assets to bear certain minimum [[credit rating]]s, or indirect, by the central bank lending to counterparties only when the security of a certain quality is pledged as [[Collateral (finance)|collateral]].

===Unconventional monetary policy at the zero bound===
Other forms of monetary policy, particularly used when interest rates are at or near 0% and there are concerns about deflation or deflation is occurring, are referred to as '''unconventional monetary policy'''. These include [[credit easing]], [[quantitative easing]], [[forward guidance]], and [[Signalling (economics)|signalling]].<ref>{{cite news|last1=Roubini|first1=Nouriel|title=Troubled Global Economy|url=https://time.com/4180698/nouriel-roubini-global-economy/|website=[[Time Magazine]]|publisher=[[Time (magazine)|Time]]|access-date=5 February 2016|date=January 14, 2016}}</ref> In credit easing, a central bank purchases private sector assets to improve liquidity and improve access to credit. Signaling can be used to lower market expectations for lower interest rates in the future. For example, during the credit crisis of 2008, the [[US Federal Reserve]] indicated rates would be low for an "extended period", and the [[Bank of Canada]] made a "conditional commitment" to keep rates at the lower bound of 25 basis points (0.25%) until the end of the second quarter of 2010.

==== Helicopter money ====
{{Main|Helicopter money}}
Further similar monetary policy proposals include the idea of [[helicopter money]] whereby central banks would create money without assets as counterpart in their balance sheet. The money created could be distributed directly to the population as a citizen's dividend. Virtues of such money shocks include the decrease of household risk aversion and the increase in demand, boosting both inflation and the [[output gap]]. This option has been increasingly discussed since March 2016 after the ECB's president [[Mario Draghi]] said he found the concept "very interesting".<ref>{{cite web|url=http://bruegel.org/2015/01/permanent-qe-and-helicopter-money/|title=Permanent QE and helicopter money {{!}} Bruegel|website=bruegel.org|date=29 August 2016 |access-date=2016-10-06}}</ref> The idea was also promoted by prominent former central bankers [[Stanley Fischer]] and [[Philipp Hildebrand]] in a paper published by [[BlackRock]],<ref>{{cite web|url=https://www.blackrock.com/us/individual/insights/blackrock-investment-institute/global-macro-outlook|title=Dealing with the next downturn|website=BlackRock|language=en|access-date=2019-11-18}}</ref> and in France by economists [[Philippe Martin (economist)|Philippe Martin]] and Xavier Ragot from the French Council for Economic Analysis, a think tank attached to the Prime minister's office.<ref>Philippe Martin, Éric Monnet and Xavier Ragot, [https://www.cae-eco.fr/staticfiles/pdf/cae-note065-en.pdf What Else Can the European Central Bank Do?], Conseil d'Analyse Economique, May 2021</ref>

Some have envisaged the use of what Milton Friedman once called "[[helicopter money]]" whereby the central bank would make direct transfers to citizens<ref>{{Cite book|last=Baeriswyl|first=Romain|title=Monetary Policy, Financial Crises, and the Macroeconomy|date=2017|publisher=Springer, Cham|isbn=9783319562605|pages=105–121|language=en|chapter=The Case for the Separation of Money and Credit|doi=10.1007/978-3-319-56261-2_6}}</ref> in order to lift inflation up to the central bank's intended target. Such a policy option could be particularly effective at the zero lower bound.<ref>{{cite web|title=The Simple Analytics of Helicopter Money: Why It Works – Always—Economics E-Journal|url=http://www.economics-ejournal.org/economics/discussionpapers/2014-24|access-date=2017-11-12|website=www.economics-ejournal.org|language=en}}</ref>