There is a lot of discussion of the right course of monetary policy for India. In this column, India’s Chief Economic Adviser argues that the country’s real policy interest rates have diverged significantly for consumers and producers, and are unusually high for the latter. The real rate is 2.4% based on the consumer price index, but 7.5% based on the GDP deflator. There is a clear need for more consideration of the appropriate measure of restrictiveness in these unusual times.
Arvind Subramanian, Monday, June 15, 2015 - 00:00
Pierpaolo Benigno, Salvatore Nisticò, Monday, June 15, 2015 - 00:00
In the aftermath of the Global Crisis, many central banks have engaged in unconventional purchases of risky securities. Such operations can entail possible losses on their balance sheets. This column argues that neutrality of open-market operations holds only in specific policy regimes, such as when central banks’ losses are covered by taxes levied on the public sector. In absence of such support, losses should be resolved through a prolonged increase in inflation.
Martin Weale, Tomasz Wieladek, Sunday, March 15, 2015 - 00:00
Wouter den Haan, Tuesday, December 23, 2014 - 00:00
Jean-Pierre Landau, Tuesday, December 2, 2014 - 00:00
Luis Garicano, Lucrezia Reichlin, Friday, November 14, 2014 - 00:00
Jagjit Chadha, Sunday, November 2, 2014 - 00:00
David Miles, Wednesday, October 22, 2014 - 00:00
Olivier Blanchard, Friday, October 3, 2014 - 00:00
Charles Wyplosz, Friday, September 12, 2014 - 00:00
Karl Walentin, Thursday, September 11, 2014 - 00:00
Marcus Miller, Lei Zhang, Wednesday, September 10, 2014 - 00:00
Richard Barwell, Jagjit Chadha, Sunday, August 31, 2014 - 00:00
In the wake of the crisis, forward guidance has become a prominent tool of monetary policy. This column argues that central banks should go a step further, communicating to the public the internal policy debate that goes into monetary policy formation – especially regarding uncertainty. Since policy is determined contingent on a range of possible outcomes, forward guidance would become more effective by explicitly communicating how policy would respond along this uncertain path.
Kaoru Hosono, Daisuke Miyakawa, Saturday, August 9, 2014 - 00:00
In the wake of the Global Crisis, several central banks have adopted unconventional monetary policies. This column presents new evidence from Japan on the transmission of monetary policy through banks’ balance sheets. Overall, the evidence suggests that bank net worth affects loan supply, that the effect depends on monetary policy and economic growth, and that this bank balance sheet channel has a significant impact on firms’ financing and investment. Exiting from unconventional monetary policies when bank balance sheets are weak could thus have a severe adverse impact on investment.
Martin Weale, Tomasz Wieladek, Tuesday, June 10, 2014 - 00:00
After reducing their policy rates close to zero in response to the global financial crisis, the Bank of England and the Federal Reserve began purchasing assets. This column assesses the effect of these asset purchases on output and inflation. In line with previous studies, the authors find that asset purchase announcements are associated with increases in both output and inflation in both countries. They also find that quantitative easing had a larger impact on UK inflation, which suggests that the UK Phillips curve is steeper.
Andrew Burns, Mizuho Kida, Jamus Lim, Sanket Mohapatra, Marc Stocker, Tuesday, January 21, 2014 - 00:00
The Federal Reserve has begun to ‘taper’ its programme of quantitative easing. The ‘taper tantrum’ that followed the announcement of tapering in May 2013 suggests that the normalisation of rich countries’ unconventional monetary policies may lead to capital outflows and currency depreciations in emerging markets. This column presents the results of recent World Bank research into these effects. In the baseline scenario, the unwinding of QE is predicted to reduce capital inflows by about 10%, or 0.6% of developing-country GDP by 2016. However, if markets react abruptly, capital flows could decline by as much as 80% for several months.
Olivier Blanchard, Jonathan D Ostry, Atish R Ghosh, Friday, December 20, 2013 - 00:00
The world has just been through a period of unprecedented macro policy activism. More is set to come as central banks exit unconventional policies, governments fix their fiscal positions, and financial regulations are reformed. These national policies have undeniable international spillovers. This column argues that the setting is ripe for more cooperation and suggests some ways forward, even if international macro policy coordination may continue to be heard about more often than it is seen.
Masazumi Hattori, Andreas Schrimpf, Vladyslav Sushko, Sunday, November 17, 2013 - 00:00
This column argues that asset purchases and forward guidance by central banks can be effective in reducing financial market participants’ tail-risk perceptions. US data suggest that, since their inception in 2008, the unconventional policies adopted by the Federal Reserve have significantly compressed perceptions of tail risk. Despite increases in risk premia during the recent ‘tapering’ episode, estimates of tail-risk perceptions still remain significantly below the levels observed when the measures were introduced. Still, the effects of exit on tail-risk perceptions remain uncertain, and will require careful monitoring.
David Miles, Tuesday, November 27, 2012 - 00:00
David Miles talks to Viv Davies about the conclusions of his recent research on quantitative easing and unconventional monetary policy. Miles discusses the different types of 'asset purchasing programmes' adopted by the Bank of England, the Fed and the ECB; they also discuss the importance of current research in these areas and the potential risks associated with quantitative easing. The interview was recorded at the Bank of England on 21 November 2012. [Also read the transcript]
Marco Annunziata, Monday, September 17, 2012 - 00:00
As the Fed announces a third round of quantitative easing, this column argues that it is unlikely to work. Investment and hiring are held back by huge uncertainty over the long-term outlook and the stimulus provides a monetary bridge over the election gap but little more.