Redefining Monetary Policy Limits: Towards an Expansion of its Role in Economic Development

Abstract

The current paradigm concedes a passive role to monetary policy on economic development. In fact, the almost exclusive objectives of moderating economic cyclical fluctuations and achieving price stability (in the short-, medium- and long-term) are considered the (only) means by which the central bank can facilitate the expansion of productive capacity. Contrary to this view, as a result of a critical and comprehensive review of the literature, the present work concludes that monetary policy can play an active role in real economy expansion, extending its powers to guide a financial intermediation process directed to economic, productive and social development.

JEL classification: E44 ; E50 ; G20 ; O23