Monetary policy

Carin van der Cruijsen, David-Jan Jansen, Jakob de Haan, 23 August 2015

Central banks have typically targeted their communication at financial markets. Increasingly, however, many have started actively communicating with the general public. Using Dutch survey data, this column finds that the public’s knowledge of monetary policy objectives is far from perfect, and varies widely across respondents. Those with a greater understanding of ECB objectives tend to form more realistic inflation expectations. Central banks seeking to target the general public must take account of discrepancies in households’ knowledge of and interest in monetary policy.

Antonio Acconcia, Giancarlo Corsetti, Saverio Simonelli, 14 August 2015

Fiscal transfers are successful in stimulating aggregate demand to the extent that they reach households with a high marginal propensity to consume. Using micro evidence from Italian earthquakes, this column argues that a well-designed programme of temporary transfers, targeted to relatively wealthy but possibly illiquid households, can be quite helpful in speeding up recovery.

Alex Pienkowski, Pablo Anaya, 06 August 2015

During the Global Crisis, sovereign debt-to-GDP ratios grew substantially in the face of shocks to growth, increased fiscal deficits, bank recapitalisation costs, and rising borrowing costs. This column looks at how these various shocks interact with each other to exacerbate or mitigate the eventual impact on debt. Choice of monetary policy regime is an important determinant of how public debt reacts to these shocks.

Angus Armstrong, Francesco Caselli, Jagjit Chadha, Wouter den Haan, 02 August 2015

Does monetary policy really face a zero lower bound or could policy rates be pushed materially below zero per cent? And would the benefits of reforms to achieve negative policy rates outweigh the costs? This column, which reports the views of the leading UK-based macroeconomists, suggests that there is no strong support for reforming the monetary system to allow policy rates to be set at negative levels.

Stefan Gerlach, Reamonn Lydon, Rebecca Stuart, 21 July 2015

Despite being a mainstay of macroeconomic theory for the past half century, the Phillips curve often receives the death knell from various commentators. These critiques often rely on results from data samples spanning relatively short periods. Using the case of Ireland, this column argues that short-term idiosyncrasies can explain the failure of the model in these contexts. Taking a longer historical view, the Phillips curve remains a useful macroeconomic model, at least in the Irish context.

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