Famous quote by William Vickrey

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The supply-side effect of a restrictive monetary policy is likely to be perverse, in that high interest rates enter into
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"The supply-side effect of a restrictive monetary policy is likely to be perverse, in that high interest rates enter into costs and thus exert inflationary pressure"

- William Vickrey

About this Quote

This quote by William Vickrey is referring to the supply-side effect of a restrictive financial policy, which is when a reserve bank increases rates of interest in order to reduce the money supply and sluggish financial growth. The quote recommends that this policy may have an unintended repercussion of increasing expenses and hence applying inflationary pressure. This is because when rate of interest are high, businesses and consumers have to pay more for loans and other types of loaning, which increases their expenses and lowers their buying power. This, in turn, can lead to higher prices and inflation. Therefore, the quote recommends that a limiting monetary policy may have the opposite effect of what was planned, and rather of slowing financial development, it may really result in higher inflation.

About the Author

Canada Flag This quote is written / told by William Vickrey between June 21, 1914 and October 11, 1996. He/she was a famous Educator from Canada. The author also have 18 other quotes.

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