Monetary policy
Fiscal implications of the ECB’s bond-buying programme
The monetary-fiscal policy connection is under scrutiny by the German Constitutional Court in the context of the ECB’s OMT bond-buying programme. This column argues that most analyses are deeply flawed by the misapplication of private-company default principles to the central bank. ECB bond-buying transforms public bonds into monetary base, and sovereign-default risk into inflation risk. The real question is: What is the non-inflationary limit to money-base expansion? This depends upon the economic situation and is much higher in the current liquidity-trap setting.
Exit strategies: Time to think ahead
Central banks on both sides of the Atlantic are pondering ways of unwinding their bloated balance sheets and easing out of extraordinary post-crisis monetary policy interventions. This column discusses the recent Geneva Conference on the World Economy that focused on ‘exit strategies’. Where exactly do central banks exit? And how? This column also introduces a new Vox feature, ‘Vox Views’, which are short video interviews with world-renown economists. The first two of these feature Alan Blinder and Don Kohn.
The case for 4% inflation
Since the double-digit inflation of the 1970s, central banks have sought to reduce inflation and keep it low. This column argues that recent history teaches us that inflation has fallen too low. Raising inflation targets to 4% would have little cost, and it would make it easier for central banks to end future recessions.
Integrating monetary policy and macroprudential regulation
The global financial crisis has shattered the confidence of many established principles of monetary policy and financial supervision. This column argues that the two should not remain separate, and maps out the major challenges faced by their complementary implementation.
Communication by the European Central Bank: Inconsistent, yet effective?
The European Central Bank has often been criticised for inconsistencies in its policy communications. At the same time, several papers show how ECB communication has been effective. This column resolves this paradox by providing evidence showing that ECB introductory statements were, in fact, quite consistent over the first decade of its operations.
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