Monetary Policy has just one role: Nominal (Macro) Stability

While fiscal policy has many roles, including providing a ‘friendly’ supply-side environment to maximize long-run growth potential. And if one tries to apply fiscal policy for stabilization purposes it will be ‘distracted’ from it´s important functions and likely cause ‘trouble’.

This comes out clearly in David Beckworth´s latest attempt to show that (only) money matters for stabilization purposes:

There is a name for this rule-based approach to monetary policy: nominal-GDP targetingIt would keep nominal spending stable while also adding more long-run certainty to the nominal incomes of households and firms. Additionally, with this approach, the Fed’s balance sheet would not be blown up by ad hoc large-scale asset-purchase programs. The Fed’s failure to adopt something like a nominal-GDP target in 2008 meant that the central bank would not be able to adequately respond to the subsequent money-demand shocks that arose over the next four years. That is, the Fed’s inaction allowed the pernicious low-interest-rate environment to develop. So while the Fed did not directly cause the low-interest-rate environment, our central bank allowed it and all of its associated problems to emerge. For that it should be blamed.

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