n the monetary policy literature a specific jargon has been coined: a “dove” is a policymaker who likes to implement active monetary policies, including inflationary ones, while a “hawk” is a policymaker who dislikes them.
Features of Hawkish Stance
- A hawk, also known as an inflation hawk, is a policymaker or advisor who is predominantly concerned with interest rates as they relate to fiscal policy.
- A hawk generally favors relatively high interest rates in order to keep inflation in check.
- Hawks are less concerned with economic growth than they are with recessionary pressure brought to bear by high inflation rates.
- High interest rates make borrowing less attractive. As a result, consumers become less likely to make large purchases or take out credit. The lack of spending equates with lowered demand, which helps to keep prices stable and prevent inflation.
- High interest rates carry a great deal of economic advantages. While they make it less likely for people to borrow funds, they make it more likely for them to save money.
- High rates dissipate risk, making banks potentially more likely to approve borrowers with less than perfect credit histories.
Features of Dovish Stance
- A dove is an economic policy advisor who promotes monetary policies that usually involve low-interest rates.
- Doves tend to support low-interest rates and an expansionary monetary policy because they value indicators like low unemployment over keeping inflation low.
- If an economist suggests that inflation has few negative effects or calls for quantitative easing, then he or she is often called a dove or labeled as dovish.
- Critics argue that a dovish monetary policy left unchecked could overheat an economy and result in runaway inflation.
- When consumers are in a low-interest rate environment created through a dovish monetary policy, they become more likely to take out mortgages, car loans, and credit cards.
- This flurry of spending affects the entire economy. Increased consumption can help create or support jobs, which is often one of the main concerns of the political system from both a taxation and a happy voter perspective.