One of the most prominent questions concerning the global economy today is whether monetary policy is approaching the limit of its effectiveness. Inflation remains well below target in the eurozone and Japan, despite aggressive quantitative easing (QE) and negative policy interest rates, and both the euro and yen have appreciated against the US dollar since the start of the year. The problem with the debate is that it has focused solely on the effectiveness of policies, without considering the need for prudence. The credibility and independence of monetary authorities are essential to the effectiveness of their ... (full story)